Ascena to sell majority stake in Maurices; Gap exec to come on board

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Ascena to sell majority stake in Maurices; Gap exec to come on board

By Marianne Wilson - 03/25/2019
Ascena Retail Group is trimming its portfolio.

The owner of Ann Taylor, Loft, Lane Bryant and other women’s apparel brands has signed a definitive agreement to sell a majority interest in Maurices to an affiliate of London-based private equity firm OpCapita LLP for about $300 million. (The 943-store Maurices division is part of Ascena’s “value” brand division.). The move is part of a comprehensive and ongoing portfolio review that is expected to yield run-rate cost savings of $300 million by July.

In a statement, Ascena chairman and CEO David Jaffe, citing “structural changes in our industry,” said the company has also developed plans for an additional $150 million in savings, which will drive operating margin rate expansion.

“These efforts are expected to deliver a leaner operating model and enhanced competitive capabilities, but we must do more,” he said. “To create value for our shareholders, we are planning deliberate actions to generate more profitable growth from those brands and operations in our portfolio that we believe have greater long-term potential.”

Ascena will continue to support Maurices on its shared business services platform through a managed services agreement, which includes support for IT, supply chain, sourcing and certain back office functions. The company noted that the ongoing managed services arrangement will serve as a template for offering third-party platform services to others.

Maurices will continue to be led by George Goldfarb, president and CEO, and its current management team. Jeff Kirwan, the former president and CEO of Gap brand, will join the company as executive chairman.

“It is an honor to join Maurices upon the closing of the transaction as it embarks on this next phase of growth,” Kirwan said. “This transformative investment by OpCapita will enhance Maurices’ differentiated market position as a value retailer with a well-priced and relevant product assortment and a significant opportunity for omnichannel customer engagement.”

Ascena said it expects to receive roughly $200 million in cash from the Maurices transaction (after expenses), while maintaining a significant minority interest. The cash proceeds will be used to pay down the company’s existing term loan balance and/or for reinvestment in the company’s business in accordance with the terms of its credit facilities.

“The sale of a majority interest in Maurices underscores the value that exists in our portfolio brands,” Jaffe said. “The review and evaluation process we are undertaking, with the help of outside advisors, is designed to recognize this value on behalf of Ascena shareholders.”

The transaction, which is subject to customary closing conditions, is expected to close by early summer.

Ascena Retail operates e-commerce websites and approximately 4,500 stores throughout the United States, Canada and Puerto Rico under a variety of banners, including Ann Taylor, Loft, Maurices, Dressbarn, Lane Bryant, Justice and more.

London-based OpCapita is a sector-focused private equity firm that specializes in transforming operationally underperforming businesses in the retail, consumer and leisure sectors. Its most relevant transaction in the retail space involves NKD, a value clothing retailer with approximately 1,800 small format stores, primarily in Germany and Austria. OpCapita achieved a successful turnaround of NKD by focusing on rationalizing the supply chain, managing store costs and enhancing customer communication, merchandise planning and inventory management, the company said.

“Our management team is very enthusiastic about this next chapter for Maurices, which will enable us to realize our full potential and compete most effectively as a specialty hometown retailer,” said Goldfarb. “OpCapita’s world-class team brings extensive operating, retail, and financial capabilities and can provide substantial insights and day-to-day assistance that will help Maurices create enhanced value.”

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