The all-cash bid is worth $1.3 billion and offers Linens 'n Things shareholders a 5% premium to Monday's closing stock price. Apollo has a financing commitment from UBS and Bear Stearns.
The news comes at the end of a rough period for the Clifton, N.J., home furnishings retailer. The company said in September it would post a break-even third quarter, a sharp disappointment for a company expected by Wall Street to make 29 cents a share for the period. Linens 'n Things said same-store sales would drop 10% for the quarter. The company at that point hired Credit Suisse First Boston to shop it around.
"This transaction with Apollo achieves the completion of our strategic review process," said CEO Norman Axelrod. "Apollo is investing in our concept, our company and our future, which will lead to additional new opportunities for all our associates and our business partners."
The merger should close in the first or early second quarter of 2006. The debt financing is subject to various conditions, including Linens 'n Things achieving earnings before interest, taxes, depreciation and amortization of at least $140 million for fiscal 2005 and a same-store sales loss of 6% or less.
Linens closed Monday at $26.40.