HINGHAM, Mass. – Women’s clothing chain Talbots Inc. rejected an approximately US$205.2 million buyout offer from its biggest shareholder on Tuesday, saying the bid undervalues the company, and announced it would explore strategic options.
The announcement was met favourably by investors, who sent the retailer’s stock up 10 cents, or 3.8 per cent, to $2.74 in morning trading. The shares have traded between $1.46 and $8.69 over the last year.
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. The company has been trying to turn this around, recently laying out plans to cut jobs, close stores, trim employees’ hours, suspend national advertising and TV campaigns and reduce inventory.
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Private equity firm Sycamore Partners offered to buy Talbots for $3 per share earlier this month. Sycamore already has a 9.9 per cent stake in the Hingham, Mass., company. The value of the buyout excludes the shares Sycamore already holds.
At the time the offer was made, Sycamore said that it was frustrated with the company’s “rapidly deteriorating situation” during the critical holiday shopping season and decided quick action was needed. It also expressed concern over the company’s results and multiyear stock price decline. Talbots’ shares have plunged more than 68 per cent this year alone.
Talbots said that it evaluated the offer but has decided it’s inadequate. The company says it will instead explore its strategic options to help maximize value for its shareholders. Many times when companies announce that they are exploring their alternatives it includes potentially selling the company.
Talbots has not set a deadline for when its review will end.
Talbots also said that it plans to continue pursuing its long-range plan and that its search for a new president and CEO is ongoing. Current President and CEO Trudy Sullivan plans to retire as soon as a successor is named.
Talbots runs 551 stores in 46 states and Canada.
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