The News Bee

Ascena to buy Ann Taylor parent for $2.16B

Ascena to buy Ann Taylor parent for $2.16B

Ascena Retail Group is expanding its women’s apparel business with a deal to buy Ann Inc., owner of the Ann Taylor and Loft brands and retail stores, for about $2.16 billion. Ascena, which owns Lane Bryant and Dressbarn, said it will pay Ann stockholders $37.34 in cash and 0.68 share of Ascena common stock for each Ann share. That’s a 21% premium over the closing price of Ann shares on May 15.635675336395376967-AP-FASHION-DEMI-MOORE-43452599

Shares of Ann jumped 22%, to $47.43 in pre-market trading Monday. Ascena shares gained more than 11% to $15.80. The deal has been approved by the boards of both companies and is expected to close in the second half of 2015. With the move, Ascena — whose chains are known more for their affordability — buys one of the best known upscale apparel brands for women seeking business attire and business-casual outfits.

For Ann Inc., the deal is a chance for its operations to be taken over by a larger rival at a time when sales are slowing and women are increasingly opting for more casual styles at work. For fiscal 2014, Ann’s revenue totaled $2.53 billion, up 1.6%. Last year, two investment firms with equity stakes — Engine Capital and Red Alder – pressed Ann’s management to consider a deal to sell the company, arguing that it was undervalued. Specialty apparel retailers are valued at about eight to nine times more than their earnings before interest, taxes and other items (EBITDA), they estimated.

Ascena, which operates 3,900 stores in the U.S. and Canada, estimates about $150 million of savings over a three-year period in procurement, back-office functions, distribution and logistics. Ann has 1,030 stores in the U.S. and Canada. The deal will generate “significant cash flow” for Ascena and contribute to its earnings in the years after closing, Ascena said.

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