The Jones Group sold to PE firm for $2.2bn

February 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

In December, retail clothing company The Jones Group Inc announced that it had entered into a definitive agreement to sell itself to private equity firm Sycamore Partners of New York.

Under the terms of the agreement affiliates of Sycamore will purchase The Jones Group for $15 per share of the company’s common stock in cash, a price which values the company at approximately $1.2bn. The total value of the transaction is likely to be approximately $2.2bn, including The Jones Group’s net debt. Upon completion of the transaction, The Jones Group will become a privately held company and will de-list from the New York Stock Exchange.

This agreed price represents a premium of approximately 19 percent compared to 11 April 2013, the last trading day prior to when media speculation began regarding the company’s plans to sell all or part of its portfolio. Although the agreement was unanimously approved by The Jones Group’s board of directors, it is still subject to approval by a majority of shareholders. Wesley Card, The Jones Group’s chief executive and Richard Dickson, president and chief executive of branded businesses at The Jones Group, who between them hold approximately 2.9 percent of The Jones Group’s stock, have each signed agreements pledging to vote their shares in favour of the merger. Accordingly both companies expect the deal to close in the second quarter of 2014. In a statement announcing the deal Stefan Kaluzny, managing director of Sycamore Partners, said “We are honoured that the board of The Jones Group has entrusted Sycamore Partners as the steward of this portfolio of iconic brands. We look forward to a successful partnership with the company’s talented associates as we continue to serve The Jones Group’s many loyal customers.”

New York based private equity firm Sycamore was an active acquirer in 2013. While it focuses primarily on investing in the retail market, Sycamore has recently made the majority of its acquisitions specifically in the fashion sector of the retail industry. In 2013 the group acquired two other fashion companies including women’s retailer Talbot Inc for $369m and retailer Hot Topic Inc for approximately $600m. Hot Topic, a clothing and accessories chain which appeals to young people in particular, was Sycamore’s fourth major investment.

It is believed that The Jones Group, owner of a number of fashion brands including the Jones New York and Nine West lines, had been courting private equity suitors for some time. At one point during the early bidding rounds, the group was close to selling to a joint venture between Sycamore Partners and KKR & Co. However, KKR eventually dropped out of joint venture talks, leaving Sycamore to pursue a deal on its own.

Sycamore enlisted Citigroup in the summer of 2013 to evaluate the group’s sale options. The catalyst for the company’s sale came following the acquisition of a 2 percent stake in the firm by activist hedge fund Barington Capital Group. The fund quickly began to apply pressure to The Jones Group to dispose of a number of its brands. In light of the strong level of interest expressed in the group, the decision was taken to sell itself entirely. Commenting on the sale to Sycamore, Mr Card said “This transaction is a result of diligent analysis and thoughtful strategic deliberations over many months with the assistance of our advisors. This all-cash transaction delivers immediate and compelling value to our shareholders. Sycamore Partners is an experienced investor in the retail sector, and, as a private company, Jones will have the flexibility to help our brands reach their true potential. We look forward to continuing to deliver exceptional products that resonate with our customers.”

Richard Summerfield