Activist's campaign at Ann Taylor owner raises M&A questions

Activist investor Stadium Capital Management LLC on Monday launched an activist campaign at Ascena Retail Group Inc. (ASNA), suggesting that the owner of the Ann Taylor Loft, Dressbarn and Lane Bryant brands may want to consider "mergers, consolidations, sales or acquisitions of assets" in a move that comes after the company recently issued downbeat 2017 guidance and posted fiscal 2016 fourth-quarter earnings that missed analysts' expectations.

The activist fund's foray comes after Ascena last month announced it was making a number of organizational changes that it expects will provide cost-savings of $100 million to $150 million by fiscal 2019. It also comes after Ascena on Sept. 19 issued a troubling earnings report that drove its stock price down from about $8.12 a share to $5.69. Since then Ascena's stock price has continued on a downward trajectory, trading up slightly on the news of the campaign early Monday at about $4.96 a share.

Stadium Capital had been accumulating shares since 2012, first as a passive investor, making a lot of its accumulations at prices well above Ascena's current share price, according to FactSet. The insurgent fund recently significantly increased its position and reported acquiring a 6.9% Ascena stake in an activist filing Monday that noted that it may seek to communicate with other shareholders and industry participants about the company. The fund added that it has been in discussions with Ascena's management "given the numerous changes" to its board in the prior year.

The Mahwah, N.J.-based company on Oct. 11 appointed Linda Yaccarino, a division chairman at NBCUniversal Media LLC, to its board. According to relationship mapping service BoardEx, a service of TheDeal, Ascena also installed four new directors in 2015.

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