It took less than two months from its bankruptcy filing for Francesca’s to secure a buyer.
Francesca’s Acquisition LLC, an affiliate created by investment firms TerraMar Capital LLC and Tiger Capital LLC, beat out four bidders to win the auction for the women’s specialty apparel retailer, officially operating as Francesca’s Holdings Corporation.
The stalking horse bidder said it would buy Francesca’s and its subsidiaries for approximately $17 million in cash, subject to certain adjustments, plus the assumption of substantial liabilities. However, the updated agreement lists the purchase price as $18 million, according to court documents.
The transaction is expected to close by the end of January, subject to approval of the U.S. Bankruptcy Court for the District of Delaware, which is currently set for Thursday. Upon the completion of the sale, the Francesca’s business will successfully exit from its Chapter 11 bankruptcy proceeding.
The other four bids came from Altar’d State owner Walter Mason Retail Inc. and liquidator Hilco Merchant Resources, FA Buyer LLC, MAS Acquisition LLC, and liquidator Gordon Brothers.
With the winning bid, Tiger Capital will acquire certain assets of Francesca’s, while TerraMar has committed to operating at least 275 Francesca’s boutiques. This would be less than half of the 558 locations the retailer operated as of Dec. 1 prior to the bankruptcy, and represents a much bigger cut than the 97 stores initially expected to close through the filing. Francesca’s already closed 137 stores starting in November as it anticipated an imminent bankruptcy.
In December, TerraMar had sent Francesca’s a letter of intent indicating that it would be the stalking horse bidder at auction. The stalking horse sets the low-end bidding bar so that other bidders cannot underbid the purchase price.
Francesca’s had been looking for a turnaround prior to the Covid-19 pandemic, and is essentially a late bloomer when it comes to digital and omnichannel retail. The company only launched its first-ever mobile apps in July in partnership with app developer Poq, already a few months after all of its then 703 stores were forced to temporarily close down due to the pandemic. And even more than 10 months into the pandemic, it only offers curbside pickup at approximately 30 of its locations.
In February, Francesca’s brought in then-Loft president Andrew Clarke as its president and CEO to engineer the turnaround. But with the company already under tight financial constraints, having said in a June SEC filing that it experienced “significant” declines in comparable sales, net sales and gross profit since its 2017 fiscal year, Clarke’s job was only made more difficult when it shuttered all of its stores on March 15 under government mandate.
Now, with a much smaller physical footprint and its business in the hands of private equity, Clarke and the Francesca’s team hope that they can leverage the new ownership to build out an improved omnichannel offering that better caters to today’s consumer.
“TerraMar shares our belief in the future of the business, has proven experience in supporting companies like ours through the next phase of growth and is committed to a revitalized Francesca’s,” Clarke said in a statement. “The buyer was chosen as the winning bidder based in part on its commitment to the future business and its recognition of the value of our people and our brand. Upon court approval and the final closing of the transaction, we believe Francesca’s will emerge a stronger company poised to drive growth by exploring new brand avenues, expanding our e-commerce channels, and providing our customers with the latest fashion options and treasure hunt experiences they know and love.”
TerraMar and Tiger Capital have not indicated which stores will remain open, or what kind of stores will be prioritized. Prior to the bankruptcy, 47 percent of Francesca’s 558 stores were in malls, 38 percent were in strip malls and off-mall locations, and the remaining 15 percent of doors operated in closed and open-air outlet centers.