Shareholders Not Happy With Terms Of J.Crew’s Private Sale
A group of J.Crew shareholders is unsatisfied with the the amount of money the clothing company is selling for — and how the $3 billion dollar sticker price was achieved — so they’re pursuing legal action.
The New York Times‘ DealBook blog reports that the shareholders, a collection of pension funds in Delaware, were unhappy with “moves that undermined the spirit of an agreement meant to try and solicit alternative offers to the $3 billion, $43.50-a-share bid by TPG Capitaland Leonard Green & Partners.”
After J.Crew received the initial bid from those two private equity firms, they extended the go-shop period intended to allow other firms to make competing offers. Higher offers, of course, would have meant more money for the shareholders.
But lawyers representing the shareholders say J.Crew’s may have prevented a higher offer from making it to the negotiating table, and the shareholders “now intend to focus all efforts towards obtaining a very significant monetary recovery.”
What were J.Crew’s offenses? First of all, President and CEO Mickey Drexler is reported to have waited for seven weeks before telling J.Crew’s board of directors that TPG and Leonard Green were intersted in buying the company. The company also scheduled a March 1 shareholder meeting to vote on the deal, which the shareholders say may have made it difficult for other potential buyers to put together competing proposals.
Two firms, Sears and Urban Outfitters, took the opportunity to look at J.Crew’s books, but neither those companies nor any other made an offer to rival the one already on the table.
For its part, J.Crew intends to fight back. It’s already agreed to extend the traditional go-shop period and won’t allow Drexler to use his shares to vote on the sale. In a statement to WWD, the J.Crew’s lawyers said, “the memorandum of understanding with the Delaware plaintiffs announced on Jan. 18 is a binding agreement and the company will challenge any attempt to change or revoke it.”
While we don’t know how many shares the Delaware plaintiffs own, the legal action they’re pursuing throws a big wrench into what we anticipated would be a relatively straightforward acquisition deal. But we should have known what when you’re talking in billions, nothing could be that simple.
Settlement Over J. Crew Deal Falls Apart [DealBook]
Shareholders Back Out of J. Crew Settlement [WWD (Subscription Required)]
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