Sycamore Partners is trying again to acquire women’s specialty chain Chico’s FAS Inc., but for the second time–and third effort–the private equity firm has decided to proceed with a lower bid.
The private equity firm disclosed in a regulatory filing Wednesday with the Securities and Exchange Commission that it sent a new letter to the chairman of Chico’s, David F. Walker. The letter contained a revised offering price of $3.00 per share, or a deal worth $353.8 million.
The revised offer is below the prior offer on May 10 that was for $3.50 a share, or a total deal value pegged at $407.8 million. It’s also even lower than Sycamore’s first offer of $4.30 a share. Chico’s has said before when it rejected a prior offer that the Sycamore offer from May 10 “substantially undervalued Chico’s.”
On Wednesday Chico’s said its board, along with independent financial and legal advisors, would review the proposal, as is consistent with its fiduciary duties. Chico’s also said, “Notably, numerous Chico’s FAS shareholders have expressed to management that they support the board’s previous decision to reject Sycamore’s proposal and share the view that Sycamore’s proposal is inadequate.”
And with a change in leadership and a resetting or priorities for growth and value creation, the company said the new initiatives are in three areas that “will positively impact results.”
Board member Bonnie Brooks is interim chief executive officer at Chico’s, while the specialty chain continues its search for a permanent CEO.
As for the lowered per-share price, Sycamore, through managing director Stefan Kaluzny, noted in its June 19 letter that the company’s “trailing twelve month EBITDA has fallen almost $35 million through the first quarter and management has lowered its guidance for the year. This continues a pattern of the company lowering its guidance and then not meeting it.”
Sycamore reiterated that it is prepared to finance 100 percent of the purchase in cash. It also pointed out that the company’s most recent full-year guidance “requires a significant improvement in performance trends and an increase in EBITDA of $10 million, or 25 percent, in the second half of the year.” The private equity firm did dangle a carrot–it said that if Sycamore’s due diligence provides it with confidence that Chico’s projected “plan is achievable, we would be prepared to increase our offer.”