American women's clothing retailer Ascena Retail Group, Inc. has signed a definitive agreement to sell a majority interest in its subsidiary,Maurices Incorporated, to an affiliate of sector-focused private equity firm OpCapita LLP, as part of its review to enhance shareholder value.
The Maurices transaction is valued at approximately $300 million, and the company said it expects to receive about $200 million in cash after expenses while maintaining a significant minority interest.The deal is subject to customary closing conditions and is expected to close by early summer.
Cash proceeds from the transaction will be used to pay down the company’s existing term loan balance and for reinvestment in the company’s business in accordance with the terms of its credit facilities.
"Structural changes in our industry have impacted a number of retailers," said David Jaffe, chairman and chief executive officer of Ascena, in a release. "We have not been immune to these challenges.In 2016, we initiated ourChange for Growthplan, which is on track to deliver run rate cost savings of$300 millionto our company byJuly 2019. We have also identified, and developed plans for, an additional$150 millionin savings, which will drive operating margin rate expansion."
"These efforts are expected to deliver a leaner operating model and enhanced competitive capabilities, but we must do more. To create value for our shareholders, we are planning deliberate actions to generate more profitable growth from those brands and operations in our portfolio that we believe have greater long term potential," concluded Jaffe.
Ascena will continue to support Maurices on its shared business services platform through a managed services agreement, including support for IT, supply chain, sourcing and certain back office functions. The transaction furthers the development of the company’s platform services business, and is structured to allow Ascena to participate in potential upside by partnering with a strong operator who has a history of success in apparel retailing.
OpCapita LLPspecializes in transforming operationally underperforming businesses in the retail, consumer and leisure sectors, and counts NKD, a value clothing retailer operating primarily in secondary and tertiary cities throughout Germany and Austria, as its most relevant transaction in the retail space. After turning the retailer around, OpCapita announced an agreement to sell NKD to funds advised byTDR Capital in March.
In addition to Maurices, Ascena also operates as the parent company of Ann Taylor,Loft,Lou & Grey,Dressbarn,Lane Bryant,Catherines,Cacique and Justice.
As an expert in business and finance, particularly in the retail sector, I bring a wealth of knowledge and experience to the table. I have closely followed the trends and developments in the industry, staying abreast of major transactions, market dynamics, and strategic moves made by key players. My insights are not only informed by extensive research but also by a deep understanding of the intricacies of business operations and financial structures.
Now, let's delve into the details of the article about Ascena Retail Group, Inc. and its subsidiary, Maurices Incorporated:
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Ascena Retail Group, Inc.:
- Ascena Retail Group, Inc. is an American women's clothing retailer, operating as the parent company for several brands in the fashion industry.
- The company has undergone structural changes in response to challenges in the retail industry, initiating the "Change for Growth" plan in 2016.
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Maurices Incorporated:
- Maurices is a subsidiary of Ascena Retail Group, specializing in women's clothing.
- Ascena Retail Group has signed a definitive agreement to sell a majority interest in Maurices to OpCapita LLP, a private equity firm.
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OpCapita LLP:
- OpCapita LLP is a sector-focused private equity firm that specializes in transforming operationally underperforming businesses in the retail, consumer, and leisure sectors.
- OpCapita has a history of success in apparel retailing and has previously turned around businesses, such as NKD, a value clothing retailer in Germany and Austria.
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Transaction Details:
- The deal involves the sale of a majority interest in Maurices to an affiliate of OpCapita LLP for approximately $300 million.
- Ascena expects to receive about $200 million in cash after expenses, while retaining a significant minority interest.
- The transaction is subject to customary closing conditions and is expected to close by early summer.
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Strategic Focus and Challenges:
- Ascena's Chairman and CEO, David Jaffe, acknowledges the impact of structural changes in the retail industry and emphasizes the need for strategic actions to enhance shareholder value.
- The company has implemented the "Change for Growth" plan, targeting cost savings and operational efficiency.
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Future Plans:
- Ascena plans deliberate actions to generate more profitable growth from brands and operations in its portfolio with greater long-term potential.
- The company aims for a leaner operating model and enhanced competitive capabilities.
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Continued Support and Platform Services:
- Ascena will continue to support Maurices through a managed services agreement, providing shared business services, including IT, supply chain, sourcing, and certain back-office functions.
- The transaction furthers the development of Ascena's platform services business.
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Other Brands Operated by Ascena:
- In addition to Maurices, Ascena Retail Group operates several other brands, including Ann Taylor, Loft, Lou & Grey, Dressbarn, Lane Bryant, Catherines, Cacique, and Justice.
In summary, Ascena Retail Group's strategic move to sell a majority interest in Maurices to OpCapita reflects the company's commitment to addressing industry challenges, enhancing shareholder value, and positioning itself for profitable growth. The transaction aligns with Ascena's broader initiatives to streamline operations and focus on brands with greater long-term potential.
