FINANCE

J.C. Penney appeals Macy’s ruling

BY Dan Berthiaume

Plano, Texas – J.C. Penney has filed an appeal of a June 16 ruling by the New York State Supreme Court that it "tortuously" interfered with Macy’s 2006 contract with Martha Stewart Living Omnimedia when Penney entered into its own contract with Martha Stewart in 2011. In the ruling, Justice Jeffrey K. Oing said Macy’s failed to prove that it is entitled to punitive damages.

However, the 63-page ruling ordered that both parties move the matter of Macy’s damages and attorney’s fees to a judicial hearing officer or special referee. Macy’s filed suit against Penney in mid-2012, accusing the retailer of infringing on Macy’s pre-existing exclusive contract with Stewart to sell her branded goods in-store and online. Penney, under the leadership of then-CEO Ron Johnson, acquired a 17% stake in Martha Stewart Living in late 2011 and was leveraging Stewart’s star power to help revive flagging sales at the department store chain.

In January 2012, Macy’s sued Martha Stewart Living for breach of contract, and then filed suit against J.C. Penney in August. Penney has not commented on the appeal.

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FINANCE

U.K.’s Mothercare rejects Destination Maternity merger offers

BY Dan Berthiaume

Philadelphia – U.K. specialty maternity retailer Mothercare Plc has rejected two non-binding written merger proposals from Destination Maternity Corp. In a press release, Destination Maternity said its second proposal, delivered June 1 2014, would combine the two companies under a new U.K. holding company which would be listed in the U.S., for a total payment of $453 million to Mothercare shareholders.

Destination Maternity said specific advantages from its merger offer include creating a global leader in maternity, baby and young children’s apparel and products with more than 4,300 global stores and $2.5 billion in global network retail sales, utilization of excess Mothercare U.K. retail space to establish stand-alone Destination Maternity stores, and leverage of Mothercare’s direct and online expertise to enhance Destination Maternity’s multichannel offering.

In response, Mothercare said the Destination Maternity offer significantly undervalued the company, did not address material concerns regarding deliverability of value, and poses risks in its structure and with tax inversion.

“We believe there is a compelling strategic rationale for a combination of Destination Maternity and Mothercare, which would create the undisputed global leader in maternity, baby and young children’s apparel and products,” said Ed Krell, CEO and a director of Destination Maternity. “Mothercare and Destination Maternity are highly complementary businesses, with strong and trusted brands in their respective markets. Together, a combined company would provide a global platform to expand both Destination Maternity’s maternity apparel business and Mothercare’s baby and children’s business."

Destination Maternity did not mention taxes in its press release, but the U.K. corporate tax rate is scheduled to drop to 20% in 2014, while the U.S. corporate tax rate is currently 38%. The company said it may alter or withdraw the deal at any time. Destination Maternity is being advised by Bank of America Merrill Lynch and Skadden, Arps, Slate, Meagher & Flom LLP.

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Report: SEC investigating data breach at Target and several other companies

BY Dan Berthiaume

Minneapolis – The Securities and Exchange Commission (SEC) is reportedly investigating whether Target Corp. adequately protected its data and informed shareholders about the possible consequences relating to its fall 2013 data breach, according to Bloomberg. The report said that Target is one of several public companies that suffered a data breach which is being investigated by the SEC.

In May 2014, Target publicly stated that the SEC, along with the FTC and states’ attorneys general, were investigating its data breach, although the SEC has not publicly commented on any investigation. The SEC is examining whether Target properly handled its data and fully disclosed the breach once it was discovered.

In guidance released in 2011, the SEC advised public companies that cyber attacks can be material to investors if they cause security spending to significantly rise or result in theft of intellectual property.

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