Chico’s Surges as Sycamore Said to Seek Takeover DealLindsey Rupp, Ed Hammond and Beth Jinks
Chico’s FAS Inc. shares jumped the most in eight months as investors bet on a potential sale of the women’s apparel chain to private-equity firm Sycamore Partners.
Sycamore is seeking to acquire the company, and a deal may be reached soon, according to a person with knowledge of the matter. Chico’s rose as much as 10 percent Wednesday, after the Wall Street Journal reported the talks.
The shares climbed 5.7 percent at the close in New York, the most since June, giving it a market value of about $2.8 billion.
Chico’s hasn’t reached a final agreement yet, and a sale could still fall through, the person said, asking not to be identified discussing private information. Chico’s is also exploring other options including a debt-funded share repurchase and cost cuts, another person said.
The retailer has cash on hand and no debt, making it appealing to private-equity buyers, this person said. Still, Sycamore struggled this year to close an earlier deal. An attempt to buy Express Inc. fell apart in January after the firm struggled to line up financing at acceptable terms.
“An LBO scenario works from a financial perspective,”
Adrienne Yih-Tennant, an analyst at Janney Montgomery Scott, wrote in a report on Wednesday.
Sycamore, based in New York, has gained a reputation as an acquirer of slumping retail companies. The firm, started in 2011 by two executives from Golden Gate Capital, previously acquired a stake in Aeropostale Inc. and extended a $150 million loan to the teen retailer.
Chico’s would be the biggest deal yet for Sycamore. The firm purchased Hot Topic Inc. for about $533.5 million in 2013 and was in talks to buy Billabong International Ltd. before discussions broke off. The firm, which oversees more than $3.5 billion in capital, also purchased Talbots Inc. in 2012.
Chico’s biggest shareholder, activist investor Blue Harbour Group LP, has been working with the company to unlock value since 2013, and already successfully agitated for increased buybacks.
Representatives for Chico’s and Sycamore declined to comment.