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PULLING OUT

Sycamore is trying to back out of its $525M deal to take a majority stake in Victoria’s Secret after having a chance to digest the impact of coronavirus. But L Brands, Victoria Secret’s parent company, is saying "no take-backs."

What’s the dealio?

The deal which was agreed to just two months ago, would take VS private and value the mall staple at $1.1B. Sycamore would take a 55% stake in the lingerie brand, thus gaining majority control from L Brands. The remaining 45%, which includes Victoria’s Pink chain, would remain with L.

As part of the agreement, Leslie Wexner would step down from his roles as CEO and chairman of L Brands. Besides the struggling share price and a PR debacle or two, he leaves his corner office amid controversy over his relationship with his "money manager" Jeffrey Epstein. Ever heard of him? He (Leslie, not Jeff) would still remain on the L Brands board and retain his equity in both companies.

Sycamore, having previously agreed to terms in February, tried to renegotiate the agreement earlier this month. L Brands, in response, stated it has no obligation to give literally any f*cks about the sudden change in the current retail environment.

So, why the cold feet?

L Brands (including Victoria's Secret) closed US stores on March 17, skipped April rent payments, and ten days later announced that it would furlough the majority of its workers. And that’s just in-store.

Back at corporate, the big L drew down $950M from its revolving credit line, cut executive pay, and suspended its quarterly dividend. Investors don’t love that if you could imagine. Shares, which were trading near $25 at the time of the deal, dropped an additional 15% on Wednesday to close at $10.03.

The bottom line...

Sycamore has got to be feeling like an oil trader approximately 72 hours ago. Courts rarely let the buyers walk away from acquisitions that have been agreed to. But there is a glimmer of hope...

In 2016, Energy Transfer Equity walked away from its deal with Williams Cos. over tax concerns. Probably something that should’ve been checked before the $33B deal was inked...

Verizon also had $350M knocked off its $4B+ pricetag of Yahoo after the search engine had two security breaches that affected more than 1B users. Spoiler: it was still a sh*tty deal.

Victoria’s Secret Buyer Seeks to Cancel Takeover After Coronavirus [WSJ]

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