J. Crew to Go Private in $3 Billion Deal

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J. CrewJ. Crew says it will be taken private in a $3 billion deal with two investment firms, including its former parent.

Under the deal, J. Crew shareholders will receive $43.50 per share from private equity firms TPG Capital and Leonard Green & Partners. That is a 16 percent premium to the stock's closing price of $37.65.

CEO Mickey Drexler, the former Gap Inc. chief credited with turning J. Crew around around since coming aboard in 2003, will remain in that role and retain a stake in the retailer.

J. Crew shares rose $6.39, or 17 percent, to $44.04 in morning trading.

TPG took a majority stake in J. Crew Group Inc. in 1997 and remained majority shareholder until the company went public in 2006.

Private equity buyouts are rising after a lull during the recession. Gymboree Corp. in October agreed to be bought by Bain Capital for $1.8 billion.

J. Crew, based in New York, also said third-quarter net income fell 14 percent to $37.8 million, or 58 cents per share. That was better than the 54 cents per share analysts expected.

Net income fell 14 percent to $37.8 million, or 58 cents per share, from $43.9 million, or 67 cents per share last year. Analysts polled by Thomson Reuters, on average, expected net income of 54 cents per share.

Revenue rose 4 percent to $429.3 million, just shy of the $430.3 million analysts expected.

Revenue at stores open at least a year fell 1 percent. The figure is considered a key measure of a retailer's performance because it excludes stores that open and close during the year.

J. Crew significantly cut its yearly guidance to $2.08 to $2.13 per share from prior guidance of $2.25 to $2.35 per share, the second quarter in a row it cut its outlook. Analysts expected $2.24 per share.

Wall Street Strategies analyst Brian S. Sozzi said J. Crew is one of the more expensive specialty retail stocks, but said any private equity buyers would get a "strong management team led by Mickey Drexler."

J. Crew had a revolving door of management until it hired Drexler to run the company in 2003. He is credited with revitalizing the fashion chain, which had struggled with an identity crisis by pushing it to return to its preppy roots and offer more upscale merchandise.

After a tough 2008 when the company suffered a loss and cut jobs and costs, during the recession, J. Crew recovered has shown relative strength. In its most recent fiscal year, which ended in January, net income more than doubled as revenue rose 11 percent to $1.58 billion. Its profit also rose in the subsequent two quarters this year on better sales and margins.

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Iselin007

Wait for the bankruptsy filing and the auction then you can get all the stuff cheap like 10 c on the $1

November 24 2010 at 8:32 AM Report abuse +1 rate up rate down Reply
Iselin007

Your dealing with the New World Order don't expect anything but a hard way to go.

November 24 2010 at 8:30 AM Report abuse +1 rate up rate down Reply
joe

J.Crew...right....twice in a row they dinged me for late charges and interest. Both times I sent the payment in the day I got the statement-almost 3 weeks before the due date. Both times they claimed they got the payment late. I cut the card up and sent it back to them. What a bunch of scumbags.

November 23 2010 at 11:07 AM Report abuse +3 rate up rate down Reply
1 reply to joe's comment
hey you

If you paid by check when the check clear? You would have known if they had the payment if you just checked your bank on line.

November 23 2010 at 1:56 PM Report abuse -1 rate up rate down Reply