Sale of Victoria’s Secret in jeopardy as buyer tries to back out

Private equity firm says store closures violate agreement

National /
Apr.April 23, 2020 07:20 PM
A photo illustration of the Victoria's Secret storefront at 722 Lexington Avenue (Credit: Google Maps)

A photo illustration of the Victoria’s Secret storefront at 722 Lexington Avenue (Credit: Google Maps)

A private-equity firm poised to buy a majority stake in Victoria’s Secret wants out of the relationship.

Sycamore Partners, which agreed in February to buy 55 percent of the company for $525 million and take it private, said in a court filing that the retailer’s response to the pandemic violated the terms of the arrangement.

Sycamore pointed to parent company L Brands’ decision to furlough employees, cut salaries and close stores during the pandemic as examples of violations. According to the New York Times, which first reported the filing, the agreement prohibited Victoria’s Secret from changing “any cash management policies, practices, principles or methodologies.”

“Until closing, L Brands is required to operate the Victoria’s Secret business in the ordinary course consistent with past practice,” Stefan Kaluzny of Sycamore said in a letter to L Brands in the filing. “Unfortunately, L Brands has failed to do this in a myriad of ways that have materially and irreparably damaged the Victoria’s Secret business.”

In response, L Brands said in a statement that it would “vigorously defend the lawsuit,” which it dismissed as “invalid.”

The lead-up to the deal was a volatile period for Victoria’s Secret, which battled slowing sales and store closures as CEO Leslie Wexner came under intense scrutiny for his relationship with disgraced financier Jeffrey Epstein.

When the agreement was reached in February, it valued the company at $1.1 billion — down from its peak valuation of $29 billion in 2015.

Afterward, Wexner announced his departure from the company in a memo to staff.

“I’ve thought about where I fit in the picture,” he wrote. “In keeping with this same thoughtful examination, I have decided that now is the right time to pass the reins to new leadership.”

Sarah Nash, the chief executive of Novagard Solutions, was set to take over as chairwoman when the sale was completed. [NYT] — Sylvia Varnham O’Regan


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