The Fighting Words On Both Sides Of J.Crew’s Private Sale

by Justin Fenner | 11:08 am, February 24th, 2011

J.Crew is fighting back against Institutional Shareholder Services, which advised the company’s shareholders to vote against the classic brand’s $3 billion sale to TPG Capital and Leonard Green & Partners just yesterday.

ISS is one of the largest proxy firms in the world, and its job is to advise its clients (often large groups of corporate shareholders) on how they should vote when the time comes for it. In this case, ISS complained that the terms of the J.Crew sale undervalue the company, meaning TPG and Leonard Green would be able to buy J.Crew on the cheap while the shareholders would get less money than they deserve.

J.Crew says that’s simply not the case. The $3 billion dollar figure, according to internal analysis, values the company at over eight times its net income over the past year. For comparison, Tommy Hilfiger was sold for just under eight times its net income.

J.Crew also cites other errors in ISS’s report to shareholders, but one thing it can’t get around is the fact that Mickey Drexler, the brand’s CEO, waited almost two months to tell the company’s board that TPG and Leonard Green were interested in purchasing the company. As we reported before, that’s one of the central issues in the lawsuit against J.Crew at the moment.

The company is doing everything it can to make sure the sale goes off without a hitch. Well, without any additional hitches. But the shareholders know that the power to approve, kill or delay this sale is up to them — their lawyers told them exactly that. According to Dealbook:

The shareholder lawyers outlined several possible courses of action, including selling shares, voting in favor of the merger, voting no or abstaining or — most drastically of all — voting no or abstaining and seeking Delaware appraisal rights, which would have Delaware’s court of chancery decide the fair value of the company’s stock.

“Whether you follow these recommendations is up to you,” the lawyers wrote. “But please recognize, without some action on your part, the chance of getting a higher price other than through a monetary judgment that may take years to achieve is greatly reduced.”

The sale gets closer and closer every day, and at this point we’re not sure how the shareholders will vote. If you owned a significant portion of J.Crew stock, what would you do?

J.Crew and Plaintiffs’ Lawyers Speak Out as Vote Nears [Dealbook]
I.S.S. Weighs In Against J.Crew Deal [Dealbook]

Shareholders Not Happy With Terms Of J.Crew’s Private Sale [Styleite]
Sears And Urban Outfitters Want To Buy J.Crew [Styleite]
What Does J.Crew’s $3 Billion Sale Mean For Shoppers? [Styleite]

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