Ascena Retail Group to Acquire Charming Shoppes for $890M
Scott Baltic / Commercial Property Executive
In what can only be described as a plus-size deal, Ascena Retail Group Inc. and Charming Shoppes Inc. have entered into a definitive agreement under which Ascena will acquire Charming Shoppes, the companies jointly announced Wednesday. The cash transaction, described by the parties as involving a “highly compelling strategic fit,” is valued at about $890 million.
Ascena will make a cash tender offer of $7.35 per share for all outstanding shares of Charming Shoppes common stock, which represents a 25 percent premium to the closing market price of Charming Shoppes common stock on May 1. The offer is expected to begin within 10 business days, and subject to the usual conditions and approvals, the acquisition is expected to close in the second quarter.
The purchase is reportedly expected to be neutral or slightly accretive to Ascena’s earnings in the first full year of combined operations and increasingly accretive thereafter.
BofA Merrill Lynch is acting as financial advisor and Proskauer Rose L.L.P. as legal advisors for Ascena. Barclays is acting as financial advisor and Drinker Biddle & Reath L.L.P. and Schulte Roth & Zabel L.L.P. as legal advisors to Charming Shoppes.
Founded in 1940, Charming Shoppes, of Bensalem, Pa., specializes in women’s plus-size apparel through its Lane Bryant, Catherines and Fashion Bug chains, totaling 1,832 retail stores nationwide. In addition to store-branded e-commerce websites, the company also operates Figi’s, a direct-marketing business. For its part, Ascena focuses on value-priced apparel for women and tween girls through more than 2,500 stores in the United States, Puerto Rico and Canada: Dressbarn (836 stores), Maurices (810 stores) and Justice (920 stores).
Retail analyst Jeff Green, president & CEO of Jeff Green Partners, Phoenix, told Commercial Property Executive that Charming Shoppes needs to “right-size before they start expanding again.”
The company announced 13 months ago that it planned to close more than 10 percent of its then 2,064 stores nationwide in 2011. About half were to be Fashion Bug locations.
It isn’t just the overall economy that’s been putting the squeeze on Charming Shoppes, Green said. More specifically, he said, the company made some less-than-optimal site decisions before the recession, putting, for example, substantial numbers of Fashion Bug and Lane Bryant stores into power centers, which have since been plagued by “go-dark anchors.”
With Mervyn’s 2008 bankruptcy, Circuit City’s 2009 liquidation and the bankruptcy last year of Borders, he said, these have been tough years for power centers. Although power centers are a cheaper option than malls, sales were too low at many Charming Shoppes stores as anchor locations went vacant and power center traffic dropped. The company’s mall stores, especially Lane Bryant, seem to be doing better, Green said.
He suggested that Ascena might be considering slicing Charming Shoppes up, then repositioning and selling some parts.