NEW YORK — Liz Claiborne Inc. wants to buy the J. Jill Group, saying it can reenergize the company, but its offer has so far been rebuffed.
“This is a very attractive and compelling price. We are willing to pay $18 per share in an all-cash deal,” Claiborne chairman and chief executive officer Paul Charron said in an interview, for a total of about $366 million. “I like the people at J. Jill and think they are good retailers, but with our knowledge of this [Baby] Boomer consumer, one we know and love, we believe we can rejuvenate the brand.”
Claiborne and J. Jill have been in negotiations for two years, with Claiborne hoping to purchase the troubled $450 million women’s apparel, accessories and footwear retail and catalogue operation. Charron said that on Nov. 12, he made his highest and latest offer — 40 percent more than J. Jill’s closing share price on Thursday of $12.79.
At Friday’s close, J. Jill Group’s stock advanced $5.72, or 45 percent, to $18.51 on the Nasdaq, while Claiborne’s shares rose 1.4 percent, or 51 cents, to $26.10 in trading on the New York Stock Exchange.
Charron said he isn’t sure why Gordon Cooke, chairman, ceo and president of the Quincy, Mass.-based firm, isn’t accepting his offer.
He said Claiborne is attracted to the J. Jill brand because it is a multichannel specialty retailer and catalogue operation with a well-known brand name. This type of operation is a target point for Claiborne and a channel of business it has been looking to get into for some time. He said he sees many fixable issues with the company.
“We can immediately leverage and better their business in a number of ways,” he said. “Some of their stores are just too big, those can be cut in half. We can make them half a J. Jill store and the other half into a Lucky Brand or Sigrid Olsen store, but this is just an example of what we would be able to do.
“They haven’t proven that they can turn the product around,” he continued. “We know this consumer so well and have a proven track record of helping these companies for the better, as we’ve done with Juicy Couture, Lucky Brand and especially with Monet, which we purchased in 2000 and took out of Chapter 11.”
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In a letter to J. Jill’s board sent on Thursday, obtained by WWD, Charron said: “J. Jill has repeatedly missed analyst earnings estimates this year. By Mr. Cooke’s own admission in the Oct. 27 earnings press release and conference call, J. Jill’s ‘overall business continues to be disappointing’ and its ‘modest top-line growth is insufficient to support desired levels of profitability’ — a situation that is being exacerbated because the more profitable direct business has suffered from what he characterized as ‘dramatic deterioration.’
“Cooke went on to note that the ‘critically important aspect of the appeal of the merchandise’ continues to be a ‘struggle.’ Given J. Jill’s continuing problems, we believe that now more than ever, your shareholders would benefit from a combination of our two companies that would provide the certainty of a substantial cash premium for their shares.”
J. Jill executives would not comment on a possible deal with Claiborne, but issued a statement on Friday that said it will review Claiborne’s offer in “due course.” The release requested that J. Jill shareholders take no action at this time in response to the acquisition proposal announced by Claiborne.
Analysts seem to agree with Charron that for J. Jill, which operates 170 stores as well as a catalogue business, a deal with Claiborne could only bring better business.
“This is a good deal for both parties. J. Jill has been struggling a bit and we know that Liz has been looking for another retail outlet,” said Jim Rice, retail analyst at Susquehanna Financial Group.
Rice added that if the deal goes through, potential firms that could feel more pressure and competition include Talbots, Chico’s and Coldwater Creek. He noted that even Appleseed’s and Draper’s & Damon, both of which were acquired last week by private equity firm Golden Gate Capital, could be affected as Claiborne grows the J. Jill business.
The fact that Claiborne made an earlier bid and was turned down, then came back, had some buy-side analysts thinking Charron might be willing to do a hostile takeover for the first time in the company’s history.
One buy-side analyst observed that J. Jill has been stumbling with efforts at turning around the company, more like “two steps forward and five steps back.” The analyst noted the deal would help Claiborne compete with Jones Apparel Group since it would have another retail operation under its umbrella.
One source familiar with the thinking of the J. Jill board believes the retailer will accept Claiborne’s offer at $18 per share.
Jennifer Black, analyst at the firm that bears her name, said the J. Jill product hasn’t been too attractive to the Baby Boomer customer, but that it would be an easy fix for Claiborne.
“J. Jill still means something and I can see Liz taking Eileen Fisher type of styling, but at lower price points, for the J. Jill customer,” Black said.
Earlier this year, J. Jill chatted with Urban Outfitters, but sources said talks broke down as both retailers saw sales at their own operations become lackluster.
Peter J. Solomon Co. is the financial adviser to J. Jill, and Kirkland & Ellis LLP and Foley Hoag LLP are the legal advisers. Goldman, Sachs & Co. is financial adviser to Claiborne, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is the legal adviser.