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A Second Fashion Acquisition Deal Is On the Verge of Collapse

More than one month after agreeing to take over British men’s wear chain Moss Bros, Brigadier Acquisition, the owner of U.K.-based apparel retailer Crew Clothing, has applied to retract the offer.

In a regulatory filing, 169-year-old Moss Bros said Brigadier was seeking to cancel the 22.6 million pound ($27.9 million) deal by invoking a material adverse change clause, which gives a buyer the right to walk away from an acquisition if events occur that are detrimental to the target company.

The board of directors for Moss Bros, which carries brands like DKNY, Hugo Boss and Ted Baker in its more than 125 stores, confirmed that it will take all necessary action to make its case to the takeover panel overseeing the acquisition that the clause’s requirements have not been met and that Brigadier will not be permitted to pull the offer.

Just two weeks after agreeing to the takeover on March 12, the men’s suiting and formalwear specialist was forced to close its entire fleet due to the COVID-19 pandemic. While Brigadier has not officially cited the coronavirus as a reason for exiting the deal, the Moss Bros board considered the coronavirus impact as a potentially significant factor that affected its operating and share price performance at the time of the deal.

Moss Bros shareholders are still scheduled to approve the deal on April 29, before any proceeding with Brigadier and the takeover panel would take place.

The retraction of the offer comes amid a similar situation in the U.S. Earlier this week, news broke that Sycamore Partners is actively seeking to terminate its agreement to acquire a 55 percent stake in Victoria’s Secret from L Brands, which would have cost the private equity firm $525 million.

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L Brands, which had hoped to sell a majority stake in the lingerie brand to eliminate some of its more than $5 billion in total debt and pivot to its more successful Bath & Body Works business, believes the termination is invalid. While the initial acquisition agreement took place Feb. 20, effects of the coronavirus pandemic in the two months since have changed how Sycamore shares interest in the deal.

On Wednesday, Sycamore filed a lawsuit in a Delaware chancery court seeking a declaratory judgment that its termination of the agreement is valid. In response, the apparel firm said it will “pursue all legal remedies to enforce its contractual rights, including the right of specific performance,” and intends to still work toward closing the transaction.

Given the uncertainties related to in-store and mall traffic for the foreseeable future, it’s more than likely that other potential mergers and acquisitions deals will end up on the chopping block, especially as retailers focus on keeping their core businesses operating efficiently through a turbulent time. Earlier in April, Walmart halted the sale of its majority stake in U.K. grocery subsidiary Asda after talks with numerous suitors for the business since 2018.