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Maurices will continue to be led by George Goldfarb, president and chief executive officer and its current management team. Jeff Kirwan, the former president and CEO of Gap brand who has extensive experience in large-scale specialty apparel retail, will join maurices as executive chairman. The Management team will be supported by OpCapita’s investment team, as well as a dedicated team in the US.
"Structural changes in our industry have impacted a number of retailers. We have not been immune to these challenges. In 2016, we initiated our Change for Growth plan, which is on track to deliver run rate cost savings of $300 million to our Company by July 2019. We have also identified, and developed plans for, an additional $150 million in savings, which will drive operating margin rate expansion. These efforts are expected to deliver a leaner operating model and enhanced competitive capabilities, but we must do more. To create value for our shareholders, we are planning deliberate actions to generate more profitable growth from those brands and operations in our portfolio that we believe have greater long term potential," David Jaffe, chairman and chief executive officer, said
The transaction is valued at approximately $300 million, and the company expects to receive roughly $200 million in cash after expenses, while maintaining a significant minority interest, Ascena said in a press release. Cash proceeds from the transaction will be used to pay down the company’s existing term loan balance and/or for reinvestment in the company’s business in accordance with the terms of its credit facilities.
"We believe there is a real opportunity to increase the profitability of maurices through hands-on operational improvement. We firmly believe that our consistent focus on operational discipline is a key differentiator embedded in the heart of our organization, and one we look forward to implementing at maurices. As we establish maurices as an independent stand-alone company, we welcome the continued support of ascena through their retained stake and the range of services they will provide," Henry Jackson, chief executive of OpCapita, said.
Additionally, Ascena will continue to support the Maurices brand on its shared business services platform through a managed services agreement, including support for IT, supply chain, sourcing and certain back office functions. The transaction furthers the development of the company’s platform services business, and is structured to allow Ascena to participate in potential upside by partnering with a strong operator who has a history of success in apparel retailing.
“The sale of a majority interest in Maurices underscores the value that exists in our portfolio brands. The review and evaluation process we are undertaking, with the help of outside advisors, is designed to recognize this value on behalf of Ascena shareholders," Kirwan said.
The Maurices transaction will strengthen the company’s balance sheet and liquidity, and the ongoing managed services arrangement will serve as a template for offering third-party platform services to others, the release added.
"It is an honour to join Maurices upon the closing of the transaction as it embarks on this next phase of growth. This transformative investment by OpCapita will enhance Maurices’ differentiated market position as a value retailer with a well-priced and relevant product assortment and a significant opportunity for omni-channel customer engagement. I look forward to working closely with George and the management team," added Kirwan.
The transaction is subject to customary closing conditions, including, among other things, expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, and is expected to close by early summer. (RR)
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