(Bloomberg)—Belk Inc., the 127-year-old department-store chain concentrated in the southern U.S., agreed to be acquired by private-equity firm Sycamore Partners for about $2.7 billion in cash.
Belk investors will receive $68 per share, with the transaction valuing the retailer at about $3 billion on an enterprise basis, the companies said in a statement on Monday. Under the terms of the deal, Tim Belk will stay chief executive officer of the department-store chain and it will keep its headquarters in Charlotte, N.C.
Sycamore, based in New York, has a strategy of investing in retail companies and trying to reinvigorate them. The firm, started in 2011 by two executives from Golden Gate Capital, purchased Hot Topic Inc. for about $533.5 million in 2013 and was in talks to buy Billabong International Ltd. before discussions broke off. The firm, which oversees more than $3.5 billion in capital, also purchased Talbots Inc. in 2012.
“Belk is exactly the kind of investment we look for: an outstanding brand with a proven success formula and the potential for further growth,” Stefan Kaluzny, managing director of Sycamore Partners, said in the statement.
Southern focus
Belk has almost 300 locations in 16 Southern states and is pushing deeper into e-commerce. Belk Ecommerce LLC, No. 123 in the Internet Retailer 2015 Top 500 Guide, had 2014 web sales of $279 million. The company was founded in 1888 by William Henry Belk in Monroe, N.C.
The broader department-store industry has struggled in recent years, hurt by slowing foot traffic at shopping malls and customers seeking bargains. Macy’s Inc., the largest department-store company, reported disappointing earnings earlier this month. It’s attempting to cope with the slump by experimenting with off-price locations and adding new brands.
Sears Holdings Corp. faces even greater challenges. That company, which runs the Sears and Kmart chains, has posted 21 consecutive quarterly sales declines. To bolster its finances, Sears generated about $2.7 billion through a plan that sells stores to a real estate investment trust and leases them back.
Macy’s is also under pressure to squeeze more money from its properties with a REIT. Activist investor Starboard Value, which owns a stake in Macy’s, has said the retailer’s stock would be worth more if it better capitalized on its real estate.
Sycamore’s Belk acquisition is slated to close in the fourth quarter of this year. The company is family owned, and a majority of shareholders are in favor of the transaction, according to the statement. Goldman Sachs Group Inc. was Belk’s financial adviser, while King & Spalding LLP provided legal advice. Sycamore consulted with Bank of America Corp. and the law firm Kirkland & Ellis LLP.
“We are delighted to have found a financial partner that sees what we see in Belk,” Tim Belk, part of the company’s third generation of family leadership, said in the statement. “We plan to grow Belk by executing our current strategic initiatives and undertaking new growth initiatives together with Sycamore.”