Ascena Retail Group to Sell Majority Interest in maurices
Ascena Retail Group announced today that it’s selling a majority interest in its maurices discount apparel brand to an affiliate of private equity firm OpCapita for approximately $300 million, according to a company press release. Ascena expects to receive $200 million in cash after expenses from the deal, as well as a minority interest in maurices. Cash from the transaction will be used to pay down Ascena's existing term loan balance and/or for reinvestment in the company's business. 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 is expected to close by early summer.
David Jaffe, Ascena's chairman and CEO, 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 sale of a majority interest in maurices underscores the value that exists in our portfolio brands," Jaffe said. "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."
Total Retail's Take: To retail watchers, this deal shouldn’t come as that much of a surprise. Earlier this month, Ascena said its value unit, which includes maurices and dressbarn, was operating at an “unacceptable level of profitability.” Unloading maurices and receiving value in return appears to be the right move. The deal will strengthen Ascena’s liquidity and balance sheet as cash proceeds from the transaction will be used partly to pay down the existing term loan balance. Getting back to profitability has been a goal of Ascena's. In fact, Ascena initiated a "Change for Growth" plan in 2016, which is on track to deliver cost savings of $300 million by July 2019. In short, to create value for its shareholders, Ascena is planning actions designed to generate more profitable growth from its brands and operations.