Dive Brief:
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Chico’s FAS has agreed to be acquired for $1 billion by private equity firm Sycamore Partners, the women’s apparel retailer said Thursday. The price reflects $7.60 per share in cash, and carries no financing condition, according to a company press release.
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Chico's board has approved the deal, expected to close at the end of Q1 2024, though it must still clear shareholder approval and antitrust scrutiny, per the release. The agreement includes a 30-day "go-shop" period that permits Chico's FAS to solicit and consider alternative acquisition proposals until Oct. 27.
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Four years ago, the retailer, which runs namesake Chico’s, White House Black Market and intimates brand Soma, resisted repeated attempts by Sycamore to take it over.
Dive Insight:
Things were quite contentious in 2019 when Sycamore tried to add Chico’s to its stable of retailers, but today the parties seem excited to seal their deal.
Sycamore’s portfolio includes several retail companies and brands, including Belk, Staples, Talbots and The Limited. In a statement, Sycamore Managing Director Stefan Kaluzny said the firm is “pleased to have reached this agreement with Chico's FAS and its Board of Directors,” and that it has long admired the company’s three brands.
In her own statement, Chico’s FAS CEO Molly Langenstein hailed what she called Sycamore’s “outstanding record in the retail industry in partnering with management teams to help businesses reach even greater levels of success.”
"Through this investment, we are gaining additional expertise, financial resources and strategic flexibility to fuel the growth of our company and three powerful brands,” she also said, adding that Sycamore shares the retailer’s “commitment to providing solutions, building communities and creating memorable experiences to bring women confidence and joy.”
Her support matters greatly, and could discourage other suitors to come forward during the “go-shop” timeframe, according to B. Riley analyst Jeff Lick.
“CEO Molly Langenstein is essential to Chico’s continued success, and, in our view, if she is implicitly backing the Sycamore bid, then we would suspect another bidder would have limited interest without her continued participation as the company’s CEO,” Lick said in a Thursday client note.
Chico’s, on the upswing at the moment, with merchandise that shows how well it understands its customer, may have been seeking a buyer with resources, according to Liza Amlani, principal and co-founder of Retail Strategy Group.
“Chico’s is almost like the sweetheart of the industry right now, with potential for growth,” she said by phone. “I believe they have a solid foundation, because they understand who their customer is and curate so well. Driving a product assortment that is so relevant to their customer kind of sets them up to start looking at expanding and scaling into new markets or maybe targeting a new customer demographic.”
The Chico’s brands may also show up at Belk stores, once they have common ownership, she said.
As of July 29, the retailer runs 1,258 U.S. stores, and sells through 58 franchise locations in Mexico and two domestic airport franchises.
