NEW YORK (TheStreet) - Lululemon Athletica (LULU) shares surged 6.9% to $41.73 in post-market trading after its founder Dennis "Chip" Wilson announced that he was selling half of his stock to private equity firm, Advent International.
Wilson owns approximately 40.2 million shares of the yoga apparel maker's common stock, representing approximately 27.7% of the outstanding shares. He is selling 20.1 million shares, or 13.85% of the company's shares, to Advent for a total of $845 million.
Lululemon's board of directors has given its "full support" of the transaction, according to a press release announcing the deal.
As part of the agreement, David M. Mussafer, Advent's managing partner will become co-chairman of Lululemon's board, serving alongside its current chairman Michael Casey. Advent's managing director Steven J. Collings will also be appointed to Lululemon's board, expanding its total number of directors to 12 from 10 currently.
Advent is no stranger to Lululemon. The private equity firm was previously invested in the company from 2005 through 2009. During that time, Advent "worked closely with Mr. Wilson and five of the company's current board members, including Chairman Michael Casey, to help the company expand from a regionally focused retailer to a globally recognized premium apparel brand," the release stated. The firm has $32 billion in assets under management and has invested in more than 290 buyout transactions in a variety of sectors across the world over the past 30 years.
Mussafer previously served as a director on Lululemon's board from 2005 to 2010, while Collins was a director from 2005 to 2009, the release said.
Additionally, Wilson and Advent have agreed to "certain standstill provisions" for the company's 2015 and 2016 annual stockholder meetings, which means they won't attempt a buyout - yet. Rather, the company will work with an independent retail expert to "evaluate and make recommendations regarding the lululemon board's committees, policies and procedures" following the completion of the stock transaction.
"Advent is a strong partner that knows lululemon and our culture and will be an incredibly helpful addition to the Board as we build an even stronger company," Wilson said in the release. Lululemon is "well positioned to successfully execute on its strategic goals, and I look forward to working alongside the entire board and management team as we focus on leveraging our core values of product and innovation to enhance value for all shareholders."
The stock purchase agreement is expected to close in 30 to 60 days, and Mussafer and Collings will take their place on the board once the transaction is completed.
Wilson hired Goldman Sachs (GS) in June to discuss ways to shake up its board of directors or perhaps take the company private. Wilson, who gave up his chairmanship late last year when the company hired its new CEO Laurent Potdevin, has been critical of Lululemon's current board. Wilson had released a statement prior to the Vancouver-based company's annual meeting in June in which said he voted against re-election of two outside directors -- Casey, a former Starbucks (SBUX) executive, Michael Casey, and private equity executive RoAnn Costin Wilson.
Lululemon had lowered its outlook for the second quarter and fiscal year when it reported fiscal first-quarter earnings in June. The company is still trying to stem the bleeding caused by its Luon pants fiasco last year by re-merchandising stores, focusing on international expansion and driving sales through social media as well as in-store technology, it said then.
However the question is whether the company can reenergize the brand quickly as competitors like Under Armour (UA), Nike (NKE) and retailers like Gap's (GPS) Athleta as well as fashion retailers VF Corp. (VFC) and H&M all seeing opportunity to play in Lululemon's sandbox.
--Written by Laurie Kulikowski in New York.