Private-equity company Sycamore Partners’ planned purchase of L Brands-owned Victoria’s Secret will not go ahead.
The companies said the decision to halt the deal was mutual.
The companies announced in February that Sycamore would take a 55% stake in Victoria’s Secret for $525m. However, in mid-April Sycamore sought to pull out of the acquisition on the grounds that L Brands breached the terms of the transaction by closing stores, furloughing employees and not paying rent in April as a result of the COVID-19 pandemic. Sycamore said that the pandemic was no excuse for the actions taken by Victoria’s Secret.
L Brands subsequently brought the action to court, seeking a declaratory judgment and an order of specific performance to enforce its contractual rights. The company stated that Sycamore had no basis to terminate the transaction agreement and that the transaction agreement stipulated that Sycamore would bear any negative risks stemming from the pandemic, and that the private-equity company knew of the pandemic at the time of the deal. It said that it was a case of the buyer wanting to get out of the deal due to the impact of the pandemic.
L Brands said it will continue the plan to establish Bath & Body Works and Victoria’s Secret as two separate, standalone companies. All previously announced leadership changes will still go into effect on May 14.
L Brands says the company will continue to take measures to manage costs to ensure liquidity in light of the pandemic, while also taking steps to improve the brands’ performance.
Nash said: “Like all retailers, the company faces an extremely challenging business environment. 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. ”
The board has named current L Brands chief financial officer Stuart Burgdoerfer as interim Victoria’s Secret ceo, effective immediately.
Burgdoerfer will also continue to serve as L Brands chief financial officer and will have a dual reporting relationship to incoming chair of the board Sarah Nash and new L Brands ceo Andrew Meslow.