Ascena agrees to buy Ann Taylor owner for US$2.1b

[CHICAGO/NEW YORK] Ascena Retail Group Inc agreed to buy Ann Inc for about US$2.16 billion, unifying the Ann Taylor and Lane Bryant brands in a bid to attract more working women.

Ann investors will receive US$37.34 in cash and 0.68 of an Ascena share for every Ann share they hold, the companies said in a statement Monday. The US$47-a-share offer represents a 21 percent premium to Ann's closing price Friday.

The takeover unites the Ann Taylor and Loft brands with Ascena's Lane Bryant, Maurices and Justice chains, creating a company with more than 4,900 stores focused exclusively on women's clothing and accessories. Adding Ann Taylor should give Ascena access to more more young, career-oriented customers, said Poonam Goyal, an analyst at Bloomberg Intelligence.

"They don't have that right now," she said. "More women are entering the workforce and achieving high positions. That's a good place to be." The companies, which had a combined US$7.34 billion in sales in the previous 12 months, said the deal will "significantly" add to earnings in the first year after closing, excluding transaction and integration expenses.

Ann has struggled to adapt to changes in the women's apparel business. Workplace attire has become more casual, giving women have less need to buy the business suits that had been Ann Taylor's calling card. And millennials have largely shunned stores that cater to older professional women.

In an effort to adjust, Ann added the Loft chain in the 1990s to sell more laid-back looks. More recently, it hired actress Kate Hudson as a brand ambassador and began using its Lou & Grey nameplate to offer clothing with a more athletic vibe. The company also has been closing brick-and-mortar locations and upgrading its online stores to sell more clothes via mobile phones and other devices.

Still, the changes haven't been enough to keep financial results from stagnating. Revenue growth in Ann's most recent fiscal year slowed to 1.6 percent, and net income tumbled 34 percent to US$68 million.

Investors Engine Capital and Red Alder pressed Ann to consider a sale last year, saying it was undervalued and could fetch as much as US$55 a share in a buyout. Ann had been exploring a sale earlier this year and had contacted rival retailers and at least two buyout firms, Bloomberg reported in February, citing people with knowledge of the matter.

News of the Ascena agreement, which has been approved by both companies' boards, sent Ann shares up 20 percent to US$46.40 in New York. Ascena fell 1 percent to US$14.07.

Ascena has built a significant part of its business from acquisitions in the past decade or so. The company purchased Charming Shoppes Inc. for about US$848.7 million in 2012, Tween Brands Inc. for about US$340 million in 2009 and Maurices Inc. for about US$320 million 2005, according to data compiled by Bloomberg.

Ascena said it has identified US$150 million in annual savings that it can generate from the Ann deal within three years of closing. The company plans to finance the takeover with bank debt and expects it to be completed in the second half of this year.

Ascena's financial advisers were Guggenheim Securities and Goldman Sachs Group Inc., and its legal counsel was Proskauer Rose LLP. JPMorgan Chase & Co. served as Ann's financial adviser, while Wachtell, Lipton, Rosen & Katz acted as legal counsel.

BLOOMBERG