* ISS recommends shareholders vote against takeover deal
* ISS says there's a "less-than-compelling" reason to sell
PHILADELPHIA Feb 22 Proxy adviser
Institutional Shareholders Services Inc recommended that J Crew
Group Inc JCG.N investors vote against the retailer's planned
$2.86 billion takeover by private equity firms TPG Capital
[TPG.UL] and Leonard Green & Partners LP.
"Based on the less-than-compelling strategic rationale to
sell the company at a lower than prevalent market premium," ISS
urged shareholders to reject the offer.
ISS also cited "serious issues in the sales process," as
well as a current discounted cash flow valuation that it above
the current offer price.
A $2.86 billion deal to acquire J Crew was announced on
Nov. 23, with TPG Group and Leonard Green agreeing to buy the
company for $43.50 a share, a premium, at the time, of about 15
percent. J Crew closed on Tuesday at $43.36, down 27 cents, on
the New York Stock Exchange.
The announcement spurred a flood of shareholder lawsuits
protesting the share price and asserting that J Crew Chief
Executive Millard Drexler breached his fiduciary duties to
Drexler had been in discussions with the private equity
firms for nearly seven weeks without informing the company's
board, raising questions about corporate governance.
The clothing retailer, which operates a chain of stores, a
catalog and website, last month settled certain shareholder
litigation over its proposed takeover by agreeing to extend the
so-called "go shop" period that allowed it to look for a
different buyer. The extended "go shop" period failed to turn
up a richer offer.
J Crew said the "proposed transaction offers a full and
fair price for J.Crew's shareholders."
"Unfortunately, ISS's report is based on flawed analyses,
and we believe that ISS has reached the wrong recommendation
with respect to the contemplated transaction with TPG and
Leonard Green," said Josh Weston, chairman of the special
committee of the J Crew's board of directors.
J Crew said it would file an investor presentation on
Wednesday to outline why the takeover bid "is in the best
interests of its shareholders" and to respond to the ISS
The retailer's shareholder of record as of Jan. 21 will
vote on the proposed takeover on March 1, the company said.
(Reporting by Jessica Hall; Editing by Bernard Orr)
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