NEW YORK (TheStreet) -- Shares of Ascena Retail Group (ASNA) are higher by 2.39% to $14.55 in mid-morning trading on Monday, after the national specialty retailer announced that it will be acquiring Ann Inc. (ANN), the parent company of Ann Taylor and LOFT, for $47 per share, a transaction that values Ann at approximately $2 billion.
Ann has struggled in recent quarters due to a weak retail environment, which has been characterized by heavy discounting and strong competition, according to the Wall Street Journal.
Shares of Ann Inc. are jumping by 20.38% to $46.60 this morning.
"This powerful transaction joins two strong and highly complementary organizations and management teams and dramatically reinforces our leadership position in women's specialty apparel retailing. We are excited to further leverage our uniquely capable operating platform and exceptional combined talent to drive immediate, significant and ongoing value for our stockholders," Ascena CEO David Jaffe said in a statement announcing the deal.
"With the addition of the Ann Taylor and LOFT brands, Ascena will become one of North America's largest and most diversified specialty apparel retailers, with a tremendous set of opportunities to continue to expand its leadership position in the women's apparel market," Jaffe added.
The deal is expected to close in the second half of this year.
Separately, TheStreet Ratings team rates ASCENA RETAIL GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ASCENA RETAIL GROUP INC (ASNA) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ASNA's revenue growth trails the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- ASNA's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The gross profit margin for ASCENA RETAIL GROUP INC is rather high; currently it is at 51.37%. Regardless of ASNA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.67% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 72.7% when compared to the same quarter one year ago, falling from $31.90 million to $8.70 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, ASCENA RETAIL GROUP INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ASNA Ratings Report