J. Crew Sells Itself for $3 Billion

What does it mean for the fashionable-sensible chinos?

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J. Crew sold itself for $3 billion to private equity firms TPG Capital and Leonard Green & Partners Tuesday. The firms will pay $43.50 a share, a 29 percent premium on the fashion retailer's average closing share over the past month, Jonathan Birchall reports for the Financial Times. Worn by everyone from Michelle Obama to nervous twenty-somethings on their first job interview, J. Crew is seen not as a chance to turn around a struggling company, but to expand one already performing well.

The chain is headed by Mickey Drexler, who was made CEO in 2003, when TPG last ran the company. "Drexler is a dominant figure at the retailer, who regularly links his mobile phone into the loudspeaker system at its New York headquarters to keep staff abreast of his design ideas and thinking. Since taking over, he has repositioned the retailer as an upmarket brand," Birchall writes. Shares shot up more than 16 percent as rumor of the deal spread.

  • A Deal That's 'Better Than Turducken' The Wall Street Journal's Shira Ovide declares as she scans Wall Street's reaction to the announcement.
  • J. Crew Will Get Even Bigger, Lydia Dishman writes at BNet. Calling the deal "a bargain," Dishman says that "TPG knows a good deal when it sees one and probably never took its eye off J. Crew  after it cashed in handsomely on the retailer’s IPO in 2006." Back then, selecting Drexler was "a huge leap of faith" since the exec had been fired from the Gap. "In a few short years, Drexler polished up his 'merchant prince' moniker and made a series of calculated fashion risks that paid off. ... Of course, anything is possible, but at this point only a series of spectacularly bad decisions could change J. Crew’s fortunes."
  • What’s Left for Drexler to Do? John Gapper wonders at the Financial Times. The question for the buyers "is whether there is anything left for Mr Drexler to do. ... He has performed a tour-de-force at J.Crew, turning it into the one of the most widely-admired retailers in the world with both vision and attention to detail. But private equity companies tout their skills as operational turnaround artists, not just financial engineers. In this case, Mr Drexler has surely done that job already."
  • A Bigger Offer Could Come, Reuters's Brad Dorfman and Alexandria Sage report, as J. Crew has till January 15 to shop around for a better deal. That "would not be a shock" but "fourth-quarter retail deals are unusual because the buyer tends to want to see how the company performs in the key holiday shopping season, while sellers want to make sure they are getting the best price." The retailer "may be trying to head off questions over weaker performance during the holidays."
  • It's A Well Managed Company, Zoe Tan writes at Morningstar, which "raises questions as to why private equity would look to acquire the company at this point... One possibility is that the allure of J. Crew rests with the expansion of newer concepts such as the bridal and men's segments, as well as the Madewell brand. Additionally, the firm may be looking for additional capital to jump-start its international expansion..."
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