L Brands shares tumbled 15% in extended trading Monday after the company announced it struck an agreement with Sycamore Partners to terminate its Victoria's Secret deal.
The company said it is "implementing significant cost reduction actions and performance improvements at Victoria's Secret," which will include "proactive measures" to ensure liquidity "in light of the ongoing Covid-19 pandemic." Like many other retailers, L Brands has been forced to shutter its stores as restrictions are implemented to halt the spread of the coronavirus.
In February, private equity firm Sycamore had agreed to acquire a 55% share in Victoria's Secret for $525 million, allowing the brand to go private. L Brands was hoping to focus on running its better-performing store, Bath & Body Works.
Sycamore said in its statement that as part of the mutual agreement, neither party in the deal is required to pay the other a termination fee.
"In connection with the termination of the Victoria's Secret transaction agreement, Sycamore Partners and L Brands agreed to settle all pending litigation and mutually release all claims," the firm added.
L Brands said it made its decision to avoid "costly and distracting litigation to force a partnership with Sycamore."
Sycamore Partners tried to end the deal with L Brands in April, citing store closures and missed rent payments in April, according to a lawsuit filed in a Delaware court.
The retailer announced that it is still interested in "establishing Bath & Body Works as a pure-play public company" and it hopes to prepare its Victoria's Secret businesses to operate as a standalone company.
Bath & Body Works has shown a consistent track record of delivering strong results, the company said. Even though nearly all stores closed temporarily to curb the spread of the coronavirus, the brand continues to serve customers online.
"It is continuing to build on its pre-pandemic momentum to fuel greater long-term growth and profitability," said L Brands.
In addition, the company announced several leadership changes that will be effective on May 14.
Leslie Wexner will step down as CEO and chairman but will remain on the board as chairman emeritus.
Andrew Meslow, the CEO of Bath & Body Works, will become CEO of L Brands and join the board.
Sarah Nash will become chair of the board, while Allan Tessler, current lead independent director, Gordon Gee and Raymond Zimmerman will retire from the board.
The board also tapped Stuart Burgdoerfer, currently L Brands' chief financial officer, as interim CEO of Victoria's Secret, effective immediately.
L Brands, which has a market value of $3.3 billion, has seen its stock fall nearly 34% since the start of the year and nearly 54% over the past year.
The company drew down $950 million from its revolving facility on March 16 to bolster its liquidity during the global pandemic. The company has also suspended its quarterly cash dividend and furloughed the majority of its store workers.