A Talbots investor who has sought to prevent the retailer’s upcoming merger has dropped a court request for a preliminary injunction barring the deal.
Shareholder John Campbell filed a securities lawsuit against the misses’ retailer and the U.S. arm of its Japanese controlling stockholder, Aeon Co. Ltd., in Delaware Chancery Court in January. In a filing with the Securities and Exchange Commission dated March 6, The Talbots Inc. said Campbell had withdrawn a motion seeking a court order halting its spin-off to special purpose acquisition firm BPW Acquisition Corp.
In return, Talbots agreed to a stipulation that calls for measures meant to empower its board. Among other conditions, Talbots will keep the positions of chairman and chief executive officer separate; put all directors up for election at the 2010 annual meeting; limit the number of directors to 10, with an independent majority, and require all board members to own a predetermined value of company stock.
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A hearing on the preliminary injunction had been scheduled for Friday. Though the stipulation will end Campbell’s quest for an immediate halt to the merger, it does not guarantee the end of the suit. According to the SEC filing, the agreement between Campbell and Talbots does not dismiss, settle or withdraw Campbell’s claims.
In the suit, filed Jan. 12, the shareholder alleges the BPW deal is a “self-interested” move by Aeon that is “designed to facilitate Aeon’s desire to terminate its debt and equity investments in Talbots.”
“As a result of the BPW acquisition, Talbots’ existing minority stockholders will see their collective 46 percent equity stake in Talbots reduced by as much as half,” Campbell’s attorneys wrote in the complaint. “In short, the transaction was not the product of procedural or financial fairness, and is patently unfair to Talbots and its minority stockholders.”
The Hingham, Mass.-based retailer revealed plans to merge with BPW in December. At the time, Talbots said it expected the transaction to close before the end of the first quarter in April.
The arrangement calls for Talbots to use at least $300 million of BPW’s trust and a new $200 million credit facility from GE Capital to repay its $491 million debt to Aeon and Japanese banks in cash. The specialty retailer would then retire the 29.9 million shares that make up Aeon’s 54 percent stake in the firm. BPW stockholders approved the proposed merger last month.