L Brands Inc. and Sycamore Partners, a private equity firm specializing in consumer and retail investments, announced a strategic transaction that is intended to deliver long-term value to L Brands shareholders by positioning Bath & Body Works as a highly profitable, standalone public company and separating Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK into a privately-held entity focused on reinvigorating its market-leading businesses and returning them to historic levels of profitability and growth.
A Transaction Committee of the Board of Directors, consisting of independent directors Allan Tessler and Sarah Nash, led the review process resulting in the transaction, which has been approved by an unanimous vote of the L Brands Board of Directors.
Under the terms of the transaction, Victoria’s Secret, with a total enterprise value of $1.1 billion, will be separated from L Brands into a privately-held company majority-owned by Sycamore. After taking into account certain liabilities, Sycamore will purchase a 55% interest in Victoria’s Secret for approximately $525 million. L Brands will retain a 45% stake in Victoria’s Secret to enable its shareholders to meaningfully participate in the upside potential of these businesses.
The company intends to use the proceeds from the transaction, along with approximately $500 million in excess balance sheet cash, to reduce debt, and expects that its overall leverage, on an adjusted debt to EBITDAR basis, will be close to its current leverage ratio.
Allan Tessler, lead independent Board director, said, “The Board undertook a comprehensive review of a broad range of options to best position its brands for long-term success and drive shareholder value. As the Board and its advisers explored these potential alternatives, we received valuable input from a number of shareholders, and we greatly appreciate their support. We are confident that this transformative transaction is the best path forward to strengthen our iconic brands and deliver enhanced value to all L Brands shareholders.”
Leslie Wexner, Chairman and Chief Executive Officer of L Brands, stated, “We believe this structure will allow Bath & Body Works – which represents the vast majority of 2019 consolidated operating income – to continue to achieve strong growth and receive its appropriate market valuation. The transaction will also allow the company to reduce debt.”
Wexner continued, “We believe the separation of Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK into a privately held company provides the best path to restoring these businesses to their historic levels of profitability and growth. Sycamore, which has deep experience in the retail industry and a superior track record of success, will bring a fresh perspective and greater focus to the business. We believe that, as a private company, Victoria’s Secret will be better able to focus on longer-term results. We are pleased that, by retaining a significant ownership stake, our shareholders will have the ability to meaningfully participate in the upside potential of these iconic brands.”
“We have long had great respect and admiration for L Brands and its success in building a world-class portfolio of lingerie and beauty brands. With unmatched global brand awareness and customer loyalty, we believe there is a significant opportunity to reinvigorate growth and improve the profitability of Victoria’s Secret. We look forward to partnering with the leadership team to pursue these objectives,” said Stefan Kaluzny, Managing Director of Sycamore Partners.