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Ascena to Acquire Ann Taylor Parent for $2.2 Billion

Ascena Retail Group, Inc. (ASNA), operator of Lane Bryant, Justice, Maurice’s, Catherine and other mall-based apparel specialty stores, announced Monday that it would acquire Ann Inc. (ANN), owner of the Ann Taylor and LOFT brands, in a cash and stock deal valued at $2.2 billion.

The transaction has been unanimously approved by both companies’ boards of directors and is expected to close in the second half of this year subject to customary closing conditions including approval by major shareholders of Ann Inc.

The past year has been a trying one for Ann Inc., characterized by declining mall traffic, a hyper-competitive women’s specialty apparel environment, missed sales and earnings performance, stagnant same-store sales, and margin declines. Two activist investor groups, Golden Gate and Engine Capital, announced significant positions in the stock. Engine had urged the board to explore strategic alternatives, including a possible acquisition.

Ascena President and CEO David Jaffe said in a statement, “This powerful transaction joins two strong and highly complementary organizations and management teams and dramatically reinforces our leadership position in women’s specialty apparel retailing. We are excited to further leverage our uniquely capable operating platform and exceptional combined talent to drive immediate, significant and ongoing value for our stockholders. With the addition of the Ann Taylor and LOFT brands, Ascena will become one of North America’s largest and most diversified specialty apparel retailers, with a tremendous set of opportunities to continue to expand its leadership position in the women’s apparel market.”

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Upon closing, Ann Inc. stockholders will receive $37.34 in cash and 0.68 of a share of Ascena common stock in exchange for each share of ANN common stock. Based on the closing price of Ascena stock on May 15, 2015, this implies a price per share of $47.00, a 21.4% premium over the closing price of ANN shares on Friday, May 15, 2015.  At closing, ANN stockholders will own approximately 16 percent of Ascena.

Ascena, which said it will finance the transaction through bank debt, has identified $150 million in annualized synergies in the combination that it expects to generate over a three-year period. The transaction aligns seamlessly with Ascena’s platform strategy and shared services model, designed to enable an effective, rapid and comprehensive back office integration process. Synergies include sourcing and procurement, distribution, logistics and other efficiencies.

Ronald Hovsepian, non-executive chairman of Ann Inc.’s board of directors, said, “Based on our Board’s thorough and wide-ranging review process, we are confident that this agreement with Ascena is in the best interests of ANN INC.’s stockholders. Our stockholders will receive approximately 80 percent of the purchase price in cash, providing immediate and certain value, and also have the opportunity to participate in the upside of the combined company as a result of the stock portion of the purchase price. We are delighted with this outcome for Ann Inc.’s stockholders.”

Kay Krill, president and chief executive officer of Ann Inc., added, “I am very proud of all we have accomplished and confident that combining with Ascena is the right next step for Ann Inc. The transaction will make us part of a larger organization with a diversified portfolio of brands focused on the women’s apparel market, a strong operating platform and a powerful financial base. As a member of the Ascena family, ANN will be poised to further enhance and grow our business as we continue to take steps to better strategically and operationally position our brands for the dynamics that are redefining the landscape of the women’s specialty retailing industry”

Ascena, whose sales last year were $4.8 billion, operates through its subsidiaries approximately 3,900 stores and several websites throughout the United States and Canada. As of Jan. 31, 2015, Ann Inc. operated 1,030 Ann Taylor, Ann Taylor Factory, LOFT, LOFT Outlet and Lou & Grey stores in 47 states, the District of Columbia, Puerto Rico and Canada, and e-commerce sites in more than 100. The company had revenues of $2.5 billion in the most recent fiscal year.

Ann Inc. stock is up 19 percent in morning trading.