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Chico’s Makes Corporate Governance Change Amid Acquisition Bid

As Chico’s FAS Inc. fields a bid to buy its business, the company is making changes to its corporate governance policies, which could improve its appeal.

The changes came in response to a request by private equity firm Sycamore Partners—which recently lowered its big to buy the struggling women’s chain—for a special meeting under the Florida’s Control Share Acquisition statute. The meeting was called in connection with the chain’s shareholder voting rights under the statute, which specifically denied the rights to an investor who owns 20 percent or more of Chico’s shares. In effect, the statute functioned as an anti-takeover mechanism, although a shareholder can regain the voting rights. That can happen if other shareholders give their approval at a special meeting or if a company opts out of the requirement.

The Chico’s board said Monday it “unanimously approved” a change in its bylaws that now has the company opting out of the statute. That means that now all shareholders can freely vote their shares in the company. A spokesman for Sycamore said the private equity firm “declined comment.”

Chico’s also emphasized that its latest board move addresses just voting rights, and is not meant to address the merits of Sycamore’s offer. The private equity firm has repeatedly tried to acquire the company.

In an open letter to shareholders, board chairman David Walkers emphasized that Sycamore’s June 19, 2019 proposal “is being reviewed by the board.”

In the most recent offer, Sycamore lowered its bid for the chain, with the revised offering price now at $3.00 a share. That translates to a deal value worth $353.8 million, down from a prior offer on May 10 for $3.50 a share, or $407.8 million, that has since been rejected by the board. The May offer was also lower than Sycamore’s first pitch to Chico’s at $4.30 a share.

In Monday’s open letter, Walker noted some of the retailer’s more recent corporate governance initiatives, including a declassification process that has all directors elected annually beginning with its 2019 annual shareholders’ meeting, and the addition of four women to the board for a more diverse membership base. The board is comprised of eight members.