Chico’s explores sale to private equity

Ed Hammond

Chico's, the US womenswear chain, is exploring a sale to private equity and has discussed a deal with potential suitors that could lead to one of the largest take-private transactions so far this year.

The final asking price could not be ascertained but one industry source said Chico's would likely command a premium of about 30 per cent to its $2.36 billion market capitalization.

Shoppers carry Chico's FAS Inc. bags in downtown La Jolla.
Sam Hodgson | Bloomberg | Getty Images

The publicly traded retailer has had talks with several private equity groups in recent weeks, according to people familiar with the situation.

Discussions are at a preliminary stage, however, and there is no certainty a deal will be agreed, another person cautioned.

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It is also unclear whether Chico's management are wedded to selling the entire business, or partnering with a private equity group.

Chico's declined to comment.

The Florida-based company operates 1,084 women's clothing stores in 48 states and owns the brands White House Black Market and Soma, in addition to its namesake line.

The downturn in mid-market retail spending has hurt the business over the past few months, with its shares falling more than 20 per cent since January after disappointing sales.

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Leonard Green, the private equity group, purchased a 1.3 per cent stake in the retailer in April.

The buyout group, which owns stakes in other retailers, including J Crew and Sports Authority, could be a potential buyer for the entire Chico's business.

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A sale of Chico's would come against a backdrop of rising deal-making in the retail sector. US retail mergers and acquisitions totaled $21.8 billion in announced deals for the year to date, more than double for the equivalent period last year, and the strongest start for the sector since 2006, according to data from Thomson Reuters.

Globally, M&A in the retail sector was a total of $50.3 billion for the year to date, an increase of 48 per cent from the same period last year.