The Work

November 23, 2010 2:47 PM

Preppy Goes Private: J.Crew Sold for $3 Billion

Posted by Tom Huddleston Jr.


Correction: 4:55 p.m., References to the special committee in the second and eighth paragraphs have been corrected to reflect the fact that the committee was comprised of individual directors who advised the company's full board and was not a committee of board members.

Rumors began swirling last night that J.Crew Inc., clothier to the prep-set, was close to an agreement to sell itself to private equity groups TPG Capital and Leonard Green & Partners. As of early Tuesday, the sale was official.

The deal is valued at roughly $3 billion, with TPG and Leonard Green paying $43.50 per share. A special committee of J. Crew's board of directors took part in the negotiations and ultimately recommended the sale to the full board.

The buyers will pay a 16 percent premium over the company's closing price on Monday and a 29 percent premium to its average closing price over the last month. J.Crew chairman and chief executive Millard "Mickey" Drexler--a shareholder who owns more than 5 percent of the company--was also involved in the process and will remain in his current role once the deal closes.

TPG first became an investor in J.Crew over a decade ago and has maintained a close relationship with the company since becoming a stakeholder.

In a statement announcing the deal, TPG partner Carrie Wheeler said: "We are proud of our 13-year history with J.Crew since our investment in the company in 1997 and the success it has achieved during our partnership with Mickey."

With an agreement in place, J.Crew now enters a "go-shop" period that will extend through the new year to January 15. During that time, the company can actively pursue higher bids from other parties. Should no better offer materialize, the deal announced on Tuesday is expected to close in the first half of 2011.

Cleary Gottlieb Steen & Hamilton advised J.Crew on the deal. The New York-based team of lawyers included M&A partners Daniel Sternberg, Jeffrey Karpf, and Matthew Salerno. J. Crew's general counsel is Arlene Hong. Cleary has represented J.Crew in the past--the firm handled the company's 2006 $430 million IPO.

J.Crew's special committee of directors was represented by Cravath, Swaine & Moore corporate partners Scott Barshay, Thomas Dunn, and James Woolery; securities partners William Fogg and Tatiana Lapushchik; tax partner Lauren Angelilli; and compensation and benefits partner Eric Hilfers. 

Drexler turned to a team from Willkie Farr & Gallagher led by corporate partner Adam Turteltaub and senior partner and former firm chairman Jack Nusbaum. As The New York Times reported, Drexler has engineered a major turnaround at J.Crew during a tenure that began in 2003. Since then, the company has grown to 244 retail stores, 79 outlets, and a profitable online catalog. The company's annual net income has almost doubled to $123.4 million over the past three years.

Ropes & Gray advised TPG on its acquisition, led by two Boston-based partners: Julie Jones, who heads the firm's securities and public companies practice, on the corporate issues and Byung Choi on the debt side. Jones has represented TPG in the past. In March she advised TPG on its proposed investment in Extended Stay Hotels. TPG's general counsel is Ronald Cami, a former partner at Cravath who joined TPG in June.

Leonard Green & Partners was represented by Latham & Watkins. New York partner Howard Sobel and Los Angeles partner Jason Silvera led the firm's corporate team on the matter.

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