In a Securities and Exchanges Commission (SEC) filing Thursday, the San Francisco-based private-equity firm revealed that it owns nearly 17.5 million shares of Ascena, purchased by various funds.
Shares of the retail group shot up Friday morning following the news, to post year-to-date growth of 13 percent.
According to the filing, Golden Gate deemed Ascena’s stock “an attractive investment that is significantly undervalued,” presenting an opportunity for the firm to become “a significant shareholder in a scale, high-quality and well-managed business at a very attractive valuation.”
It also said it’s in the “early stages of discussions” with Ascena’s management team and the board of directors to help it achieve its “substantial potential as a public company.”
Golden Gate plans to leverage its “significant retail experience” in addition to its “public and private equity experience” to assist in creating value for Ascena’s shareholders.
The company’s other retail investments have included PacSun, Eddie Bauer and Payless.
“We believe management has a clear path to meaningfully improved operating margins consistent with its well-performing peers and its long operating history and in particular given the additional scale, synergies and profit improvement opportunities offered by the Ann acquisition,” said a letter from Golden Gate to Ascena’s president and CEO, David Jaffe, dated October 8 that was included in the filing.
“We endeavor to operate in a transparent and straightforward manner, and we intend to be a long-term holder with a multi-year investment horizon, working collaboratively with management and the Board to help achieve a business’s full potential as a standalone public company.”