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Victoria's Secret/Sycamore Partners deal off; chain will be spun off

L Brands intends to spin-off its Victoria's Secret business as a standalone company following the termination of its agreement to sell the business to Sycamore Partners.

L Brands and Sycamore Partners on Monday confirmed by “mutual agreement” the termination of Sycamore Partners’ previously announced agreement to acquire the retailer’s Victoria’s Secret business. In February, L Brands announced it was selling a majority stake (55%) stake in Victoria's Secret to the private equity firm for about $525 million in a deal that valued the lingerie brand at $1.1 billion. About a month later, the COVID-19 was declared a pandemic and stores shuttered nationwide. 

In mid-April, tensions between the two companies came to a head and L Brands accused Sycamore of “buyer’s remorse” in trying to back out of the deal. In a complaint filed in a Delaware court, it noted that “as Sycamore has conceded, this is a case of a buyer trying to get out of a deal because of the impact of the COVID-19 pandemic. In announcing the termination of their agreement, L Brands and Sycamore agreed “to settle all pending litigation and mutually release all claims.”  The firm 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 related news, L Brands said it remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses (collectively, Victoria’s Secret) to operate as a separate, standalone company.

“Like all retailers, the company faces an extremely challenging business environment,” stated current director and future board chair Sarah Nash. “Our board believes that it is in the best interests of the company, our stockholders and our associates to focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore. We are implementing significant cost reduction actions and performance improvements at Victoria’s Secret while continuing to drive strong growth at Bath & Body Works.”

L Brands also said that its previously announced leadership and governance changes will go into effect on May 14,the same day as its 2020 annual stockholders meeting. At that time, Leslie Wexner will step down as CEO and chairman, but remain a board member as chairman emeritus. Also, Andrew Meslow, CEO of Bath & Body Works, will become CEO of L Brands and join the board and Sarah Nash will become board chair.

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