Ascena to buy Ann Taylor owner for $2.16 billion

Ascena Retail Group Inc. agreed to buy Ann Inc. for about $2.16 billion, adding the Ann Taylor and Loft chains to its collection of women’s apparel brands.

Ann investors will receive $37.34 in cash and 0.68 of an Ascena share for every Ann share they hold, the companies said in a statement Monday. The $47-a-share offer represents a 21 percent premium to Ann’s closing price Friday.

The takeover unites the Ann Taylor and Loft brands with Ascena’s Lane Bryant and Cacique, creating a company with more than 4,900 stores focused exclusively on women’s clothing and accessories. The companies, which had a combined $7.34 billion in sales in the previous 12 months, said the deal will “significantly” add to earnings in the first year after closing, excluding transaction and integration expenses.

Ann has struggled to adapt to changes in the women’s apparel business. Workplace attire has become more casual, so women have less need to buy the business suits that had been Ann Taylor’s calling card. And millennials have largely shunned stores that cater to older professional women.

In an effort to adjust, Ann added the Loft chain in the 1990s to sell more laid-back looks. More recently, it hired actress Kate Hudson as a brand ambassador and began using its Lou & Grey nameplate to offer clothing with a more athletic vibe. The company also has been closing brick-and-mortar locations and upgrading its online stores to sell more clothes via mobile phones and other devices.

Stagnating results

Still, the changes haven’t been enough to keep financial results from stagnating. Revenue growth in Ann’s most recent fiscal year slowed to 1.6 percent, and net income tumbled 34 percent to $68 million.

Investors Engine Capital and Red Alder pressed Ann to consider a sale last year, saying it was undervalued and could fetch as much as $55 a share in a buyout. Ann had been exploring a sale earlier this year and had contacted rival retailers and at least two buyout firms, Bloomberg reported in February, citing people with knowledge of the matter.

News of the Ascena agreement, which has been approved by both companies’ boards, sent Ann shares up as much as 23 percent in early trading in New York. The stock had gained 6.1 percent this year through the end of last week. Ascena climbed as much as 12 percent in early trading.

Ascena acquisitions

Ascena has built a significant part of its business from acquisitions in the past decade or so. The company purchased Charming Shoppes Inc. for about $848.7 million in 2012, Tween Brands Inc. for about $340 million in 2009 and Maurices Inc. for about $320 million in 2005, according to data compiled by Bloomberg.

Ascena said it has identified $150 million in annual savings that it can generate from the Ann deal within three years of closing. The company plans to finance the takeover with bank debt and expects it to be completed in the second half of this year.

Ascena’s financial advisers were Guggenheim Securities and Goldman Sachs Group Inc., and its legal counsel was Proskauer Rose LLP. JPMorgan Chase & Co. served as Ann’s financial adviser, while Wachtell, Lipton, Rosen & Katz acted as legal counsel.

This story was originally published May 18, 2015 at 9:24 AM with the headline "Ascena to buy Ann Taylor owner for $2.16 billion."