Chico's rejects buyout offer from Sycamore Partners
The board of Chico’s FAS has unanimously rejected an unsolicited buyout proposal from Sycamore Partners.
The struggling women’s apparel retailer received an offer from Sycamore Partners on May 10 to acquire the retailer for $3.50 per share in cash, about $407.8 million. On Thursday, May 16, Chico’s said that, following a review, it had determined that Sycamore's proposal substantially undervalues the company and is not in the best interests of its shareholders.
"Chico's FAS benefits from a strong operating and financial foundation, including a portfolio of differentiated brands, loyal customers and robust omnichannel capabilities, stated David Walker, board chair. “Sycamore's interest underscores the upside opportunities that these competitive advantages create, but the prices Sycamore has proposed are inadequate and fail to recognize the full value of the company and its future prospects."
The rejection of the proposal follows Chico’s rejection of a previous offer from Sycamore (on April 14, 2019) to acquire the company for $4.30 per share. The board also found that offer as substantially undervaluing the company.
Chico’s has been challenged by sliding sales amid a decline in mall traffic and online competition. The company’s total same-store sales fell 4.9% last year and net sales slipped to $2.1 billion from $2.3 billion.
In January, Chico’s announced that it planned to close at least 250 stores across its three brands during the next three years. In April, CEO and president Shelley Broader resigned. While it searches for a permanent replacement, Bonnie Brooks, former vice chair, president and CEO of Hudson’s Bay Company and a current member of the Chico’s board, is serving as interim chief.
“We are encouraged by the direction Bonnie Brooks is taking with respect to our company's merchandising and marketing strategies since being appointed interim CEO,” said Walker in a statement on Thursday. “In addition, our search for a permanent CEO is well underway, with great executive candidates who have a proven track record in the apparel industry being considered.”
“We are confident in our ability to fully capitalize on the market positioning of each of our brands to drive topline growth across our portfolio and deliver value to our shareholders well in excess of what Sycamore has proposed," continued Walker.