Talbots offer will let it buy back Aeon stake

NEW YORK Wed Apr 7, 2010 11:57am EDT

NEW YORK (Reuters) - Talbots Inc's TLB.N said it had cleared the way to complete a financing deal to buy control of the company from Japan's Aeon Ltd (8267.T), allowing it to shed debt and invest more cash in its business.

Talbots shares rose 4.4 percent after the women's apparel retailer said it had reached more than 90 percent acceptance on the deal's exchange offer. It had repeatedly extended the deadline in the past week to hit that threshold to go ahead with the deal, which it expects to close by Friday.

Under the deal, Talbots is buying a company called BPW Acquisition Corp BPW.A by exchanging Talbots shares and warrants for BPW warrants. Shares in BPW rose 11.2 percent.

BPW is a special purpose acquisition company, a shell organization that raises money from public investors to merge with another company. Shareholders of BPW, which went public in February 2008 in a $350 million initial public offering, approved the merger with Talbots last month.

With the cash it gets from BPW, Talbots will buy back the 54 percent stake that Aeon owns, ending a 21-year relationship with Japan's second-largest retailer. Talbots will use the money to reduce its debt by about $330 million.

When the deal was announced in December, Talbots said GE Capital, the financing arm of General Electric Co (GE.N), would provide an additional $200 million credit facility.

Talbots has faced "a major liquidity crisis." This deal will ease that crisis and let the chain compete better with rivals, said FBR Capital Markets analyst Adrienne Tennant.

"It allows them some capital expense flexibility on marketing, store improvements and inventory investments," Tennant said.

Talbots shares were up 58 cents at $13.79 on the New York Stock Exchange in morning trading, while BPW shares were up $1.36 at $13.46 on the NYSE Amex.

(Reporting by Phil Wahba. Additional reporting by Martinne Geller; Editing by Derek Caney, Michele Gershberg and Robert MacMillan)

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