Tween Brands Soars on Dress Barn Takeover - TheStreet

Another day. Another retail consolidation. Another bit of evidence that Darwin was right.

This time, it's women's apparel retailer

Dress Barn

(DBRN)

buying the struggling

Tween Brands

(TWB)

for about $157 million in stock.

The news sent shares of both companies soaring in early morning trading, with Dress Barn up 5.5% to $13.96 and Tween Brands up 25% to $6.47.

Under the agreement one share of Tween brands can be exchanged for .47 shares of Dress Barn. Each Tween share would be worth $6.22 based on Dress Barn's close of $13.24 on Wednesday. The deal represents a 20% premium on Tween Brands' Wednesday close of $5.18.

Tween Brands stockholders will own about 16% of Dress Barn's outstanding shares once the transaction is complete. The deal is expected to close in the fourth quarter.

In the process, Dress Barn will save Tween Brands from its outstanding debt, which it will repay under the agreement.

Tween Brands, which targets the 7- to 14-year-old girl, has been hurt especially hard during the recession. In the first quarter, the company recorded a loss of $1.4 million and for the full-year ended Jan. 31 saw a loss of $17 million. The company operates under the labels Justice and Limited Too but is currently in the process of transitioning all of its stores to the lower-priced Justice concept.

Earlier in the year, the tween apparel retailer said it would close 30 to 40 stores during the year as it converts the stores.

So why would Dress Barn purchase such a flimsy chain? CEO and President David Jaffe said Tween brands will give Dress Barn the opportunity to diversify.

And it seems the tween market is the next destination of growth for apparel chains. Earlier this month

Aeropostale

(ARO)

opened its new children's concept

, P.S., which targets practically the same demographic as Tween Brands.

Dress Barn anticipates the transaction will be neutral to earnings in the first full year of operations and add to earnings in the future.

Tween Brands will become a Dress Barn subsidiary upon completion, with its Chairman and CEO Mike Rayden reporting to Jaffe.

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