Chico’s FAS Inc. has been on Stefan Kaluzny’s radar for some time.
Kaluzny — managing director of Sycamore Partners and a key retail consolidator — offered to buy the women’s apparel retailer in 2019 for $4.30 a share and then $3.50 and then $3 before the process broke off.
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Chico’s sense of its self worth was clearly justified as Kaluzny came knocking again, and this time his offer was much higher, and he proved willing to go higher still.
According to a filing with the Securities and Exchange Commission detailing the more-recent courtship between the two companies, it all restarted with a little trip.
On a Saturday in early May, Kaluzny reached out to Kevin Mansell, the former chief executive officer of Kohl’s Corp. who is now chair of Chico’s, for an in-person meeting.
The two met on May 19 in River Hills, Wisc., and started off talking about “the retail industry generally and recent developments in the industry.”
That sounds like a casual lead-up to the inevitable.
“Towards the end of this meeting, Mr. Kaluzny indicated Sycamore’s interest in pursuing a potential acquisition of Chico’s,” the filing said. “Mr. Mansell requested that Sycamore convey its interest in a written letter, which Mr. Mansell would provide to the board for discussion.”
Sycamore offered to buy the 1,258-door retailer for $7 a share in cash — about $864 million total — and that it wouldn’t need financing or to do any due diligence on Chico’s to close the deal.
That kicked off a flurry of discussions among the Chico’s board members and with the company’s financial adviser, investment bank Solomon Partners.
Kaluzny emailed Mansell for an update after nearly six weeks and was told a response was on its way. Mansell called the suitor the following week and said the $7 per share offer “did not reflect the value of Chico’s” and proposed that Sycamore meet with chief executive officer Molly Langenstein to hear more about the initiatives.
“On that call, Mr. Kaluzny expressed disappointment in the company’s response, citing in particular the certainty represented by Sycamore’s not needing to conduct due diligence and not requiring third-party financing to consummate the transaction,” according to the filing.
But Sycamore came back on July 19 and upped its offer to $7.50 a share, sweetening the offer by about $62 million. At the end of the month, Chico’s came back with a counter offer of $8 a share and Kaluzny agreed.
Kaluzny did then have a meeting with Langenstein. The process continued until late September, when Sycamore revised its offer down to $7.60 a share due to “receipt of information that the company’s performance was weaker than previously forecasted.”
Mansell came back to propose $7.75, but Kaluzny said $7.60 was his final offer — and the deal was announced at that price the next day, Sept. 28. Sycamore agreed to pay $938.1 million for all the company’s stock.
The contract gave Chico’s the latitude to try to find a better offer until the end of Oct. 27, what’s known as a “go-shop” period.
Solomon Partners reached out to 114 potential buyers, including 46 strategic players and 68 financial parties.
Two private equity firms and three strategic players took the bait and signed nondisclosure agreements to take a closer look at the company.
Ultimately, the filing, obscuring the party’s names, said, “PE Firm A declined to submit an alternative acquisition” and “Company B” said it “would potentially be interested in acquiring the company’s Soma business at some time in the future, but did not submit any proposed offer price.”
The go-shop period ended. Now Chico’s is set to hold a special meeting for its shareholders to vote on the deal.
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