Sycamore Partners acquires Belk for $3bn

November 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity firm Sycamore Partners has entered into a definitive agreement to acquire Belk, Inc., the family owned and operated fashion department store company.

Under the terms of the merger agreement, New York-based Sycamore Partners will acquire 100 percent of Belk in a transaction with an estimated enterprise value at closing of approximately $3bn. Furthermore, all Belk stockholders will receive $68 per share in cash for each share of Belk common stock they own.

Additionally, a number of Belk stockholders have agreed to vote shares owned or controlled by them representing, in the aggregate, a majority of the voting power of Belk’s shares, in favour of the transaction.

A specialist in consumer and retail investments, Sycamore Partners has more than $3.5bn in capital under management. Utilising a strategy which sees the firm partner with management teams to improve the operating profitability and strategic value of their businesses, Sycamore Partners’ investment portfolio currently includes Aeropostale, Coldwater Creek, EMP Merchandising, Hot Topic, the Kasper Group, Kurt Geiger, MGF Sourcing, Nine West Holdings, Pathlight Capital, Talbots and Torrid.

The deal to acquire Belk is said to be Sycamore Partners’ largest transaction to date.

“We have great respect for Belk’s management team and associates, its deeply rooted brand, its footprint of stores and its growing online presence,” said Stefan Kaluzny, managing director of Sycamore Partners. “Belk is exactly the kind of investment we look for: an outstanding brand with a proven success formula and the potential for further growth.”

Founded in 1888, Belk is the largest family owned and operated department store company in the US. Operating approximately 300 stores located in 16 southern states and with a rapidly growing digital presence, the company is in the third generation of Belk family leadership. In the fiscal year ended 31 January 2015, it generated revenue of $4.1bn, up 1.8 percent compared with the previous year.

First mooted in April this year, when Belk revealed that it was exploring a possible sale, the merger agreement has been unanimously approved by the company’s board of directors.

“We are delighted to have found a financial partner that sees what we see in Belk: a 127-year-old brand that remains relevant today with exceptional customer loyalty in small, medium and large cities throughout the South,” commented Tim Belk, the company’s chairman and chief executive.

“We plan to grow Belk by executing our current strategic initiatives and undertaking new growth initiatives together with Sycamore. This transaction is an across-the-board win for our stakeholders.”

Under the terms of the transaction, Mr Belk will remain as chief executive and the company will continue to be headquartered in Charlotte. The company’s current chief operating officer (COO), Johnny Belk, Tim Belk’s brother, said he intends to continue as Belk’s COO until January 201, then will leave the company to pursue “other interests”.

Brian Hamilton, chairman of Sageworks, a firm that provides research on private companies, described the acquisition as a “pretty good deal” for all those involved. Mr Hamilton said: “Sycamore is getting a solid company, with a proven track record of profitability, positive cash flow from operations, and consistent revenue. Belk is getting what appears to be a fair offer, valuing their company at 20 times their trailing earnings.”

Goldman, Sachs & Co. is acting as financial adviser and King & Spalding LLP is acting as legal adviser to Belk. BofA Merrill Lynch is acting as financial adviser and Kirkland & Ellis LLP is acting as legal adviser to Sycamore Partners.

The merger is subject to certain customary conditions, including the receipt of regulatory and stockholder approval, and is expected to be completed in the fourth quarter of 2015.

Fraser Tennant