L Brands, Inc. (NYSE: LB) and Sycamore Partners, a private equity
firm specializing in consumer and retail investments, today
announced a strategic transaction that is intended to deliver
long-term value to L Brands shareholders by positioning Bath &
Body Works as a highly profitable, standalone public company and
separating Victoria’s Secret Lingerie, Victoria’s Secret Beauty and
PINK (collectively, Victoria’s Secret) into a privately-held entity
focused on reinvigorating its market-leading businesses and
returning them to historic levels of profitability and
growth.
A Transaction Committee of the Board of
Directors, consisting of independent directors Allan Tessler and
Sarah Nash, led the review process resulting in the transaction,
which has been approved by a unanimous vote of the L
Brands Board of Directors. Under the terms of the transaction,
Victoria’s Secret, with a total enterprise value of $1.1 billion,
will be separated from L Brands into a privately-held company
majority-owned by Sycamore. After taking into
account certain liabilities, Sycamore will purchase
a 55% interest in Victoria’s
Secret for approximately $525 million. L
Brands will retain a 45% stake in Victoria’s Secret
to enable its
shareholders to meaningfully participate in the
upside potential of these businesses. The company intends to
use the proceeds from the transaction, along with approximately
$500 million in excess balance sheet cash, to reduce debt, and
expects that its overall leverage, on an adjusted debt to EBITDAR
basis, will be close to its current leverage ratio.
Allan Tessler, lead independent Board
director, said, “The Board undertook a comprehensive review of
a broad range of options to best position its brands for
long-term success and drive shareholder value. As the Board and its
advisers explored these potential alternatives, we received
valuable input from a number of shareholders, and we
greatly appreciate their support. We are confident
that this transformative transaction is the best
path forward to strengthen our iconic brands and deliver
enhanced value to all L Brands shareholders.”
Leslie Wexner, Chairman and Chief Executive
Officer of L Brands, stated, "We believe this structure will allow
Bath & Body Works – which represents the vast majority of 2019
consolidated operating income – to continue to achieve strong
growth and receive its appropriate market valuation. The
transaction will also allow the company to reduce debt.”
Wexner continued, "We believe the separation of
Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK into
a privately held company provides the best path to restoring these
businesses to their historic levels of profitability and growth.
Sycamore, which has deep experience in the retail industry and a
superior track record of success, will bring a fresh perspective
and greater focus to the business. We believe that, as a private
company, Victoria’s Secret will be better able to focus on
longer-term results. We are pleased that, by retaining a
significant ownership stake, our shareholders will have the ability
to meaningfully participate in the upside potential of these iconic
brands."
"We have long had great respect and admiration
for L Brands and its success in building a world-class portfolio of
lingerie and beauty brands,” said Stefan Kaluzny, Managing Director
of Sycamore Partners. “With unmatched global brand awareness and
customer loyalty, we believe there is a significant opportunity to
reinvigorate growth and improve the profitability of Victoria’s
Secret. We look forward to partnering with the leadership team to
pursue these objectives.”
LEADERSHIP CHANGES
Upon the closing of the transaction, Wexner will
step down as Chief Executive Officer and Chairman of the Board of L
Brands. He will remain a member of the Board as Chairman Emeritus.
Tessler said, “Les Wexner is a retail legend who has built
incredible brands that are household names around the globe. His
leadership through this transition exemplifies his commitment to
further growth of Bath & Body Works and Victoria’s Secret and
driving overall shareholder value.”
Nick Coe, the current Chief Executive Officer of
Bath & Body Works, has been named Vice Chairman of Bath &
Body Works Brand Strategy and New Ventures. In Coe’s new role, he
will focus more intently on the strategic position of the business,
the evolution of the brand, product development and new
ventures/acquisitions. Andrew Meslow, currently Chief Operating
Officer of Bath & Body Works, has been promoted to Chief
Executive Officer of Bath & Body Works. At the close of the
transaction, Meslow will become Chief Executive Officer of L Brands
and will join its Board.
“For nearly nine years, Nick and Andrew have
been a powerful combination, driving the Bath & Body Works
brand to more than $5 billion in sales with best-in-class
profitability. Management and the Board have been engaged in
thoughtful discussions over the past few years to develop a
succession plan that leverages the unique partnership established
by Nick and Andrew to advance the long-term, strategic direction of
the brand,” Wexner said. “We are pleased to name Andrew as CEO of
Bath & Body Works and have Nick step into this new, more
focused role as the team propels the brand and business
forward.”
“Andrew’s deep company knowledge, his retail and
financial acumen and his unwavering commitment to doing the right
thing for the customer, our business and our associates make him
the ideal leader for the next chapter of Bath & Body Works,”
Coe said. “Andrew and I have walked side by side on this journey,
and I look forward to our continued collaboration in our new roles
as the entire team remains committed to keeping this exceptional
brand on a growth trajectory well into the future.”
Meslow, who joined L Brands in 2003, has 29
years of experience in the retail industry, the last 15 at Bath
& Body Works.
GOVERNANCE AND BOARD
STRUCTURE
The Board of Directors remains committed to
continuing governance enhancements, including submitting proposals
at the 2020 Annual Meeting of Shareholders to declassify the Board
and to eliminate the company’s supermajority voting requirements.
The company has also demonstrated its continuing commitment to
board refreshment, most recently through last year’s election of
Sarah Nash and Anne Sheehan to the Board. This refreshment process
will continue this year with the retirement, as of the date of our
Annual Meeting, of the following directors: Allan Tessler, lead
independent director; Gordon Gee; and Raymond Zimmerman. Andrew
Meslow will join the Board at the closing of the transaction. In
addition, Heidrick & Struggles remains engaged to assist in the
identification and evaluation of potential new directors.
EXTENSION OF BARINGTON CAPITAL GROUP
AGREEMENT
The company also announced today that it has
extended its agreement with Barington Capital Group, L.P. and
Barington Companies Equity Partners, L.P. (collectively,
“Barington”), for an additional twelve months. Under the agreement,
Barington will continue to serve as special advisor to L
Brands.
Tessler stated, “Barington has been an
invaluable advisor to the company during the last year, enabling us
to focus on strategies that will unlock long-term shareholder
value. They have provided us with essential shareholder input
in areas including board governance, corporate strategy and brand
management. We are looking forward to continuing our
relationship with Barington as we transition to a more focused
company.”
James
A. Mitarotonda, Chairman and Chief Executive Officer
of Barington said, “We are pleased to have worked with
the L Brands Board and management team and I congratulate
them on the steps they have taken to address the operational,
financial and governance objectives we first outlined last
year. We look forward to continuing our relationship with the
company and are confident that today’s announcements will
position the company for future success.”
ESTIMATED FOURTH QUARTER
RESULTS
The company expects to report a fourth quarter
comparable sales decline of 2 percent, consisting of a positive 10
percent comp at Bath & Body Works and a decline of 10 percent
at Victoria’s Secret. The company remains comfortable with its
guidance for fourth quarter adjusted earnings per share, which was
provided on Jan. 9, 2020. The company will report fourth quarter
earnings results on Feb. 26 after the close of the market and
conduct its earnings call at 9 a.m. Eastern on Feb. 27.
ADVISORS
BridgePark Advisors and PJT Partners are serving
as financial advisors to L Brands and Davis Polk &
Wardwell is serving as legal counsel. Kirkland & Ellis
LLP is serving as legal counsel for Sycamore Partners.
ADDITIONAL INFORMATION
An investor presentation with additional
information can be found on the company’s website, www.LB.com.
ABOUT L BRANDS:L Brands,
through Victoria’s Secret, PINK and Bath & Body Works, is an
international company. The company operates 2,920
company-owned specialty stores in the United States, Canada, the
United Kingdom and Greater China, and its brands are also sold in
more than 700 franchised locations worldwide. The company’s
products are also available online at www.VictoriasSecret.com and
www.BathandBodyWorks.com.
ABOUT SYCAMORE
PARTNERS: Sycamore Partners is a
private equity firm based in New York. The firm specializes in
consumer, distribution and retail-related investments and partners
with management teams to improve the operating profitability and
strategic value of their business. Sycamore has approximately $10
billion in assets under management. The firm's investment portfolio
currently includes Belk, Coldwater Creek, CommerceHub, Hot Topic,
MGF Sourcing, NBG Home, Pure Fishing, Staples, Inc., Staples United
States Retail, Staples Canada, Talbots, The Limited and Torrid.
ABOUT BARINGTON CAPITAL GROUP,
L.P.:Barington Capital Group, L.P. is a fundamental,
value-oriented activist investment firm founded in January 2000 by
James A. Mitarotonda. Barington invests in undervalued publicly
traded companies that it believes can appreciate significantly in
value when substantive improvements are made to their operations,
corporate strategy, capital allocation and corporate
governance. Barington’s investment team, advisors and network
of industry experts draw upon their extensive strategic, operating
and boardroom experience to assist companies in designing and
implementing initiatives to improve long-term stockholder
value. Barington has significant experience investing in
consumer-focused companies, with prior investments in companies
such as The Children’s Place, Dillard’s, The Jones Group, Warnaco,
Nautica, The Pep Boys, Steven Madden, Avon Products and Darden
Restaurants.
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995
We caution that any forward-looking statements
(as such term is defined in the Private Securities Litigation
Reform Act of 1995) contained in this press release or made by our
company or our management involve risks and uncertainties and are
subject to change based on various factors, many of which are
beyond our control. Accordingly, our future performance and
financial results may differ materially from those expressed or
implied in any such forward-looking statements. Words such as
“estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,”
“intend,” “planned,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, in some cases have affected and in
the future could affect our financial performance and actual
results and could cause actual results to differ materially from
those expressed or implied in any forward-looking statements
included in this press release or otherwise made by our company or
our management:
- the risk that the transaction is not consummated, including the
risk that required regulatory approvals for such transaction may
not be obtained;
- diversion of our management’s attention away from other
business concerns;
- the ongoing obligations of our company in connection with the
transaction;
- general economic conditions, consumer confidence, consumer
spending patterns and market disruptions including severe weather
conditions, natural disasters, health hazards, terrorist
activities, financial crises, political crises or other major
events, or the prospect of these events;
- the seasonality of our business;
- the dependence on mall traffic and the availability of suitable
store locations on appropriate terms;
- our ability to grow through new store openings and existing
store remodels and expansions;
- our ability to successfully expand internationally and related
risks;
- our independent franchise, license and wholesale partners;
- our direct channel businesses;
- our ability to protect our reputation and our brand
images;
- our ability to attract customers with marketing, advertising
and promotional programs;
- our ability to protect our trade names, trademarks and
patents;
- the highly competitive nature of the retail industry and the
segments in which we operate;
- consumer acceptance of our products and our ability to manage
the life cycle of our brands, keep up with fashion trends, develop
new merchandise and launch new product lines successfully;
- our ability to source, distribute and sell goods and materials
on a global basis, including risks related to:• political
instability, significant health hazards, environmental hazards or
natural disasters;• duties, taxes and other
charges;• legal and regulatory matters;• volatility in
currency exchange rates;• local business practices and
political issues;• potential delays or disruptions in shipping
and transportation and related pricing impacts;• disruption
due to labor disputes; and• changing expectations regarding
product safety due to new legislation;
- our geographic concentration of vendor and distribution
facilities in central Ohio;
- fluctuations in foreign currency exchange rates;
- stock price volatility;
- our ability to pay dividends and related effects;
- our ability to maintain our credit rating;
- our ability to service or refinance our debt;
- shareholder activism matters;
- our ability to retain key personnel;
- our ability to attract, develop and retain qualified associates
and manage labor-related costs;
- the ability of our vendors to deliver products in a timely
manner, meet quality standards and comply with applicable laws and
regulations;
- fluctuations in product input costs;
- our ability to adequately protect our assets from loss and
theft;
- fluctuations in energy costs;
- increases in the costs of mailing, paper and printing;
- claims arising from our self-insurance;
- liabilities arising from divested businesses;
- our ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the security of customer, associate,
third-party or company information;
- our ability to comply with regulatory requirements;
- legal and compliance matters; and
- tax, trade and other regulatory matters.
We are not under any obligation and do not
intend to make publicly available any update or other revisions to
any of the forward-looking statements contained in this press
release to reflect circumstances existing after the date of this
press release or to reflect the occurrence of future events even if
experience or future events make it clear that any expected results
expressed or implied by those forward-looking statements will not
be realized. Additional information regarding these and other
factors can be found in Item 1A. Risk Factors in our 2018 Annual
Report on Form 10-K.
For further information, please contact:
L Brands: |
|
Investor Relations |
Media Relations |
Amie Preston |
Tammy Roberts Myers |
(614) 415-6704 |
(614) 415-7072 |
apreston@lb.com |
communications@lb.com |
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