Private-equity firm Sycamore Partners has made a bid to acquire all of Express, Inc. (NYSE:EXPR), sending shares of the clothing store chain through the roof. Sycamore had already acquired a 9.9% stake in Express.
Sycamore seeks to buy Express
Bloomberg reports that Sycamore Partners sent a letter to Express, Inc. (NYSE:EXPR)’s board of directors expressing an interest in making a bid for the entire retail chain. The firm said it wants to conduct due diligence to decide how much to bid for the company. According to the letter, Sycamore will make an offer within 30 days of gaining access to the clothing chain’s financial books.
Express, Inc. (NYSE:EXPR) does not appear interested in a buyout at all, as the retail chain adopted a poison bill to keep Sycamore from increasing its stake in any further. The shareholders’ rights plan prevents shareholders from amassing a 10% stake or more. However, the poison pill does not keep Express from considering or even accepting an offer from Sycamore. The retailer also said it has created a special committee to consider its strategic possibilities.
Sycamore specializes in retail
Sycamore Partners has focused on the retail sector, so Express, Inc. (NYSE:EXPR) would fit in well with its portfolio. Last year the firm paid approximately $533.5 million to buy Hot Topic Inc. The private-equity firm was also negotiating with Billabong International Ltd. at one point, although those talks broke down. In 2012, Sycamore also purchased Talbots Inc.
Express, Inc. (NYSE:EXPR), however, would be a larger gamble for Sycamore, according to Bloomberg. The clothing chain has a market value that is about double that of Hot Topic’s price. Also Express’s profits and sales have declined for the last two consecutive quarters.
Express tries to turn things around
Currently Express, Inc. (NYSE:EXPR) CEO Michael Weiss is attempting to save the sinking ship. He’s working on moving unsold inventory and focusing more heavily on the company’s factory stores. However, analysts are expecting the retail chain’s earnings and sales to keep declining for at least the next couple of quarters.
Last month Express, Inc. (NYSE:EXPR) slashed its annual profit guidance to 90 cents per share, down from around the previous guidance of $1.23 per share. The entire retail industry has been rocked by deep discounts and increasing competition. Foot traffic in U.S. shopping malls has also been declining, which has hurt Express because most of its stores are located in malls. Last month, the chain said it plans to shut down 50 stores over the next three years.