US Private Equity Fund Sycamore Announces Abandonment Of Takeover Of "Secret"

In February this year, the US private equity fund Sycamore Partners announced that it had already reached an agreement with the American fashion group L Brands Inc., and would acquire $55% of the shares of Vitoria's Secret Victoria s Secret (hereinafter referred to as "Wei Wei") by US $525 million. (see "ornate ambition" report: Valuation of 1 billion 100 million U.S. dollars, the crisis in the private brand Sycamore private equity fund acquisition)

On Wednesday, Sycamore Partners said that because L Brands violated the agreement reached between the two sides, they decided to abandon the takeover. L Brands said that the act of Sycamore Partners was not legal.

Due to the outbreak of the new crown virus outbreak, L Brands announced that it will close its underwear brand, Brands, Pink and bathing brand Bath & Body Works in all retail stores in the United States and Canada from March 17th.

In the documents submitted to the court, Sycamore Partners said that L Brands had not obtained their permission before making the decision to close the store. In addition, other measures such as the total number of 88 thousand employees were suspended from pay leave, the rent payment was stopped, the executive compensation was reduced and other adverse effects on the business were violated, which had violated the agreement reached between the two parties. Sycamore Partners wrote in the document: "although these actions are designed to deal with the outbreak, they do not become a clear reason why L Brands violates the agreement reached between the two sides."

L Brands said that the statement of Sycamore Partners had no legal effect, and would guarantee the interests of the group through legal means, including asking the court to force Sycamore Partners to complete the acquisition.

Generally speaking, the purchase agreement will include some provisions that allow the buyer to terminate the purchase, such as the special circumstances caused by irresistable factors such as earthquake and plague. Although the two sides' agreement has excluded the effects of the epidemic on allowing Sycamore Partners to abandon the acquisition, the latter said that it did not affect their decision to abandon the takeover because of L Brands's irregularities.

Eric Talley, a professor at Columbia law school, said, "there is no doubt that L Brands will object, but Sycamore Partners may have enough reasons to support them in giving up the acquisition, though this will have an impact on their public image."

Sycamore Partners said in its submitted document that it had rejected L Brands's request for renegotiation of the purchase price. But Talley said it is possible for both sides to reach a new takeover agreement.

By the time the market closed on Wednesday, shares of L Brands fell 15.5% to $13.78 per share. In the past three months, the share price of L Brands has fallen by more than 50%.