Fort Myers-based women’s retailer Chico’s FAS, after a tumultuous four-year period that included three CEOs, multiple reinventions of its customer approach and product assortment and the fending off of at least one potential hostile takeover attempt, has a new exit strategy: being acquired by a private equity firm.
The company, with $2.14 billion in revenue in fiscal 2023, has entered into a purchase agreement with New York-based Sycamore Partners, a private equity firm specializing in retail, consumer and distribution-related investments. The deal, according to a Sept. 28 statement, is for $1 billion, or $7.60 per share in cash. That represents a 65% premium to the company's closing stock price of $4.61 Sept. 27. The stock, in addition, has fallen 6.3% year to date, according to Morningstar, while the S&P 500 SPX has gained 11%.
"Through this investment, we are gaining additional expertise, financial resources and strategic flexibility to fuel the growth of our company and three powerful brands: Chico's, White House Black Market and Soma," Chico’s President and CEO Molly Langenstein says in the release. "Sycamore Partners has an outstanding record in the retail industry in partnering with management teams to help businesses reach even greater levels of success.”
For Sycamore Partners — which has held a small stake in the retailer for years — acquiring Chico’s amid a wider retail industry shakeout is the culmination of an effort to buy the company that dates back to at least 2012. In 2019, Sycamore made two offers to buy Chico’s FAS: One was for $3.50 per share for a total of $406.7 million; another was for $4.30 per share. The Chico’s board rejected both, saying the offers were too low. Other offers over the years were rejected, too.
Also, in April 2020, Chico’s adopted a short-term shareholder rights plan, commonly known as a poison pill. Company officials at the time said the poison pill wasn’t a response to any specific takeover bid or other proposal to acquire control of the company. But it was necessary due to “the unprecedented impact of the global COVID-19 pandemic on equity market valuations, including the dislocation in the company's stock price,” the company said.
None of those past issues were enough to dissuade Sycamore Partners, with a portfolio that includes, or has included, retailers Lane Bryant, Loft Ann Taylor, Belk, Hot Topics and Talbots.
"We are pleased to have reached this agreement with Chico's FAS and its board of directors. We have long admired the company's three iconic brands, including Chico's, White House Black Market and Soma,” Sycamore Partners Managing Director Stefan Kaluzny says in the release. "We look forward to partnering with the company's more than 14,000 talented associates to grow these brands by continuing to deliver excellent products and service to their devoted customers."
Chico’s meanwhile has had three CEOs since April 2019: Shelley Broader, Bonnie Brooks and, since April 2020, Langenstein. Each CEO rolled out multiple programs and initiatives designed to meld the business model, which focuses on an older demographic, with a younger generation. This included a closing, at one point, of some 200 stores.
Today Chico’s, founded in 1983 on Sanibel, operates 1,258 stores in the U.S. and sells merchandise online and through 58 international franchise locations in Mexico and through two domestic franchise locations in airports.
The transaction announced Sept. 28, approved unanimously by Chico's board, is expected to close by the end of the first quarter of 2024, subject to customary closing conditions and approvals, including approval by Chico's FAS shareholders. The sale deal also includes a 30-day "go-shop" period that will expire Oct. 27, and “permits Chico's FAS and its financial advisor to actively solicit and consider alternative acquisition proposals,” the release states. Upon completion of the transaction, Chico's FAS common stock will no longer be listed on the NYSE.