The Board of Directors of Chico’s FAS, parent company of Chico’s, White House Black Market and Soma, has rejected an acquisition proposal from private equity firm Sycamore Partners for the second time in a month.
In the latest proposal, Sycamore said it sought to buy Chico’s FAS for $3.50 per share in cash, or approximately $407.8 million. David Walker, Chico’s FAS Board Chair, described the offer in a statement as “inadequate.” The latest offer was actually less than the initial proposal from Sycamore, which was for $4.30 per share. The proposed $3.50 price comes in nearly 8% below the company’s $3.85 per share stock price as of May 17, 2019.
The struggling apparel retailer is undergoing a major repositioning, closing 250 stores across the three retail banners through 2021 to further review its operations and cut costs. In April, CEO and President Shelley Broader abruptly departed, with an SEC filing later reporting that her exit was an “involuntary termination.” Bonnie Brooks, former Vice Chair, President and CEO of Hudson’s Bay Company, serves as Chico’s Interim CEO. The retailer is presently considering candidates for a permanent CEO.
The sought-after turnaround has been sluggish; Chico's FAS total comparable sales dipped 3.8% in Q4. Same-store sales fell 7.9% at the flagship Chico's brand and 2.9% at White House Black Market, with Soma being the lone bright spot: sales there rose 6.2%. For 2018, Chico’s FAS saw comparable store sales fall 4.9%. While the company saw net income of $35.6 million last year, revenue has declined every year since 2014.
The retailer has embraced tech-forward trends to improve its fortunes in 2019, debuting a tech-enabled fit bra for Soma and launching TellTale, an e-Commerce pure play intimate apparel business aimed at Millennials.
Sycamore is a minority owner of Chico’s, holding 6.6% of Chico's shares. The firm typically invests in retail and consumer companies, most notably acquiring Staples in 2017. The company also acquired and revived The Limited in 2017 and previously owned Nine West Holdings prior to its bankruptcy and exit.
Sycamore came close to acquiring Chico's in 2015, but the deal fizzled because the firm could not obtain financing, according to The Wall Street Journal.