Retail mergers and acquisitions are picking up steam in what could be a harbinger of vigorous activity in the new year.
After sitting out the financial crisis and the worst of the recession, private equity players are expected to start really flexing their muscles in 2011. McKinsey & Co. estimated that the buyout specialists are sitting on as much as $100 billion that could be put to work in retail.
The pre-Christmas rush for private equity deals led to last-minute acquisitions on both sides of the Atlantic last week.
Leonard Green & Partners signed an estimated $1.6 billion deal to take arts and crafts retailer Jo-Ann Stores Inc. private, and Advent International reached a $1.7 billion agreement to sell Takko, the German value-oriented fashion chain it has owned for three years, to Apax Partners.
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It’s the second big retail transaction in as many months for Los Angeles-based Leonard Green, which teamed with TPG and J. Crew Group Inc. chief executive officer Millard “Mickey” Drexler in a $3 billion deal to take the company private. The firm has a range of retail investments, from David’s Bridal Inc. and The Sports Authority to Neiman Marcus Group Inc. and Rite Aid Corp.
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There might well be other deals — especially on the smaller side — that crystallize before New Year’s Day as buyers and sellers complete transactions that could bring tax benefits.
Earlier last week, Oxford Industries Inc. acquired Lilly Pulitzer for $60 million and VF Corp. inked a $57 million deal to buy Rock & Republic out of bankruptcy.
The purchase price for Jo-Ann, which translates into $61 a share, represents a 34 percent premium to the stock’s Wednesday close of $45.63.
Scott Cowen, Jo-Ann’s lead director and chairman of the special committee that evaluated the deal, said, “While the company was not actively seeking this transaction, once the offer was received and negotiated, the special committee determined that it was in the best interest of the company’s shareholders, as well as its employees and other partners.”
The deal includes a go-shop provision, which allows the company to solicit other offers though Feb. 14. The Hudson, Ohio-based Jo-Ann has 756 stores across 48 states.
Antitrust officials still have to weigh in on Advent’s Takko sale, which is expected to be completed in the first quarter. Terms of the deal were not disclosed, but a source pegged the sale price at about 1.3 billion euros, or $1.7 billion at current exchange.
Sales of the Frankfurt-based chain have grown about 30 percent since 2007 to 938 million euros, or $1.25 billion at the average 2010 exchange rate. Advent expanded the chain’s European presence by 450 doors to a total of 1,500 stores. This year, the retailer also sped up the expansion of its 1982 urban concept, which focuses on basic items such as T shirts and sweatshirts.
“Takko has grown very successfully and sustainably over the last three-and-a-half years, reporting double-digit growth rates in the globally difficult economic climate of fiscal years 2008 and 2009,” said Ralf Huep, managing partner and global co-head at Advent.
Since 1984, the private equity firm has cut more than 250 deals in 35 countries valued at about $52 billion. Advent has been an active player in retail and has invested in Stokomani in France, Milano in Mexico and Charlotte Russe in the U.S.