Rue21 said on Thursday that it would sell itself to Apax Partners for about $1.1 billion, including debt, as private equity firms continue their pursuit of purveyors of fashion.
Under the terms of the deal, Apax will pay $42 a share, a 23 percent premium to Wednesday’s closing price.
Shares in rue21 jumped 22 percent in early morning trading on Thursday to $41.78.
Private equity firms, flush with cash, have continued to demonstrate interest in fashion retailers and clothing makers. Two weeks ago, TowerBrook Capital agreed to buy the high-end denim maker True Religion Apparel for $835 million. And earlier this year, Sycamore Partners struck a $600 million deal for Hot Topic, the mainstay of teenage mall shoppers.
In an unusual twist, one of rue21’s biggest shareholders is a buyout fund named SKM II, the last remnant of Sanders Karp & Megrue â€" which merged in 2005 with Apax. Under the terms of the transaction, a majority of shareholders apart from SKM, which owns a 30 percent stake, must vote to approve the Apax takeover.
Thursday’s leveraged buyout caps the resurgence of rue21, which had filed for bankruptcy in 2002 and re-emerged the next year. Since then, the company has grown as a seller of cheap, trendy clothing for teenagers, with its stock having risen over 40 percent since going public in 2009.
Rue21 separately announced preliminary results for its first quarter, including a 9.1 percent rise in net sales. But the company said that it expects to report earnings of 44 cents a share, falling short of the average analyst estimate of 48 cents a share, according to Standard & Poor’s Capital IQ.
As part of Thursday’s deal, a special committee of rue21’s board will seek potential rival suitors during a 40-day “go shop†period. If it chooses to accept a higher bid, the company will pay a roughly $10 million break-up fee to Apax. Rue21’s management team, including chief executive Robert Fisch, have agreed to work with any serious bidder that arises from the go-shop.
The special committee of rue21’s board was advised by Perella Weinberg Partners and the law firms Kirkland & Ellis and Potter Anderson & Corroon.
Apax was advised by JPMorgan Chase, Bank of America Merrill Lynch and Goldman Sachs, all of which are providing debt financing. The buyout firm received legal counsel from Simpson Thacher & Bartlett and Richards, Layton and Finger, while SKM was counseled by Ropes & Gray.
