Apax Partners Retreads Rue21 Amid Retail Buyout Boom
The buyout agreement comes amid consistent demand since the Great Recession by cash rich private equity firms to invest in popular apparel firms and retail outlets. Rue21's takeover follows a near $1 billion buyout agreed to by TrueReligion (TRLG) earlier in May and speculation that Saks Fifth Avenue (SKS) may be taken over or merge with Neiman Marcus.
Were shareholders to agree to Thursday's deal, it would mark the second time Apax Partners would own rue21. Apax Partners took control of rue21 in the wake of its 2003 bankruptcy and it took the company public six years later.
rue21 priced a November 2009 IPO at $19 a share, meaning its proposed takeover would represent over a 100% gain in just over three years in public markets.rue21s's takeover price comes at a 23% premium to Wednesday closing share price and would represent a record high stock price for the retailer. Still, rue21's buyout also comes as the retailer has underperformed markets in recent years. As part of Thursday's deal, rue21 will conduct a 40-day "go shop process" to solicit higher bids by private equity or strategic buyers. According to the company, it would only pay a $10 million breakup fee to Apax Partners were it to agree to an alternate takeover proposal. SKM II funds, a fund affiliated with Apax Partners that owns approximately 30% of rue21's outstanding shares, said in a statement it would support the company's sale. SKM also said it would vote in favor or any superior offer agreed by rue21's special committee soliciting competing bidders. rue21 is SKM II funds' last remaining investment and the company "has been associated" with Apax Partners since 2005, the company said in a statement. According to rue21, the company will still need a majority of shareholders, excluding SKM funds, to support the proposed buyout. "Thanks to the hard work of our associates, rue21 has generated strong top and bottom line growth both as a private company and as a public company... This transaction will allow us to focus on achieving our long-term objectives," Bob Fisch, rue21 chief executive said in a statement. "This all-cash transaction delivers substantial and certain value, and we believe it is in the best interests of rue21 stockholders. To ensure we are maximizing value for rue21 stockholders, we are also committed to running a comprehensive go-shop process to determine if there are any superior alternatives that may exist to the Apax transaction," Bruce Hartman, Chairman of the Special Committee, said. rue21 shares gained over 23% in early Thursday trading to $41.98, just below Apax Partners proposed buyout price. J.P. Morgan, Bank of America Merrill Lynch and Goldman Sachs are providing financial advice to Apax, in addition to debt financing. Perella Weinberg Partners is acting as financial advisor to the Special Committee of the rue21 Board of Directors. -- Written by Antoine Gara Follow @antoinegara
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV