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Talbots soars as firm makes $205.2M buyout bid

December 7, 2011
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NEW YORK—Shares of struggling women's clothing company Talbots Inc. jumped more than 62 percent on Wednesday after private equity firm Sycamore Partners made a $205.2 million takeover offer.

THE SPARK: Sycamore, Talbots' biggest stockholder with a 9.9 percent share, disclosed in a regulatory filing on Tuesday that it offered $3 per share to buy the chain. Excluding the shares Sycamore already owns, the deal is worth about $205.2 million.

The offer is a 92 percent premium to Talbots' Tuesday closing stock price of $1.56.

Talbots has met with Sycamore, but the firm said that Talbots' managers have rebuffed attempts to discuss any "value-enhancing transaction."

News of the buyout bid came one day after Talbots announced that is seeking a new chief executive and that its president and CEO, Trudy Sullivan, plans to retire as soon as a successor is named.

THE BIG PICTURE: Talbots has struggled for some time, posting an annual loss in three of the past four years. It lost $22 million in its most recent quarter, its third loss in the past four quarters. As it announced that loss last week, Talbots laid out plans to cut jobs, close stores, trim employees' hours, suspend national advertising and TV campaigns and reduce inventory.

Sycamore said Tuesday that it is frustrated with the Hingham, Mass., company's "rapidly deteriorating situation" during the critical holiday shopping season and decided quick action was needed. Talbots' stock has plummeted more than 80 percent this year alone.

THE ANALYSIS: Adrienne Tennant of Janney Capital Markets said in a client note that she could not argue with Sycamore's all-cash offer.

"While a full-blown turnaround would likely yield a far higher valuation, there is tremendous uncertainty surrounding such a turn, and a new management team will likely take another 12 months to execute a new strategy and impact the business in any material way," the analyst wrote.

The analyst kept a "Neutral" rating and raised Talbots' price target to $3 from $1 to account for the takeover offer.

Wedbush's Betty Chen lifted Talbots to "Neutral" from "Underperform" and doubled its price target to $3 from $1.50, saying she anticipates that a deal will likely be completed.

SHARE MOVEMENT: Talbots' stock gained 98 cents, or 62.8 percent, to $2.54 in morning trading. Over the last year, the shares have traded in a range of $1.46 to $9.30.

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