J.Crew will be acquired by two investment firms for $3 billion, according to a document released moments ago by the preppy-chic retailer. (We first reported on this Monday night–click here for some background.)
This will allow CEO Mickey Drexler and co. to fix what’s wrong with the business–and build on what’s right–without having to deal with public shareholders.
“It is a clear endorsement of J.Crew and of the hard work and commitment of each and every one of our associates,” Drexler said of the agreement. “As I have always said, we are in this for the long term and we do what we do day in and day out so we can deliver the best possible products to our customers.”
We think, overall, this is a risky-but-smart move. Retail is a cyclical business–you just simply cannot be on top forever. Even though going private often means gaining debt, it also means being able to avoid a black hole. (See: Gap.)
Good luck to Mickey and the J.Crew team. (PS, We love Madewell and want more of it. Please.)
Tags: J. Crew, Madewell, Mickey Drexler
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what does that mean if you have shares in the company? i dont, just wondering. does your money just disappear?
Public shareholders will get bought out–meaning they’ll get whatever their shares were worth at the time the company is officially sold.
TPG likely believes J.Crew is undervalued by the market. They stand to make a great deal by taking the company private for now, and public again a few years down the line. That’s probably what Mickey Drexler means by “clear endorsement of J.Crew.” Yes, J.Crew has reported subpar earnings, but this is far from a company in distress. It’s less about “fixing what’s wrong” and much more about realizing the full financial potential of the company.
The terms of the deal are on the investor page of the J.Crew site (http://www.jcrew.com/footer/investorrelations.jsp) – the shares were purchased for $43.50. The shares were around $38 a share before the deal was announced. When an acquiring company purchases another publicly traded company, they have to purchase the equity (the shares or common stock generally), so the shareholder will receive the transaction purchase price, assuming the transaction is approved by the governing agencies (to ensure the transaction doesn’t cause anti-trust issues) and I believe the shareholders also have to approve the purchase (which they generally would since the purchase is making more money for them).