L Brands, Inc. announced its Board of Directors has approved a plan to separate the company into two independent, public companies: Bath & Body Works, a bath, body and home fragrance retailer, and Victoria’s Secret, including Victoria’s Secret Lingerie, PINK and Victoria’s Secret Beauty, a retailer of intimates and beauty products.
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The company expects to create these companies through a tax-free spin-off of Victoria’s Secret to L Brands’ shareholders. The spin-off will enable each company to maximize management focus and financial flexibility to thrive in an evolving retail environment and deliver profitable growth.
“In the last ten months, we have made significant progress in the turnaround of the Victoria’s Secret business, implementing merchandise and marketing initiatives to drive top line growth, as well as executing on a series of cost reduction actions, which together have dramatically increased profitability,” said Sarah Nash, Chair of the Board.
“As a result of these efforts, Victoria’s Secret is now well-positioned to operate as a standalone, public company. Further, both Bath & Body Works and Victoria’s Secret are leaders in their respective markets, and, as separate businesses, each will be ideally positioned to benefit from a sharpened focus on pursuing growth strategies best suited to each company’s customer base and strategic objectives. With this in mind, the Board believes that this path forward will return the highest value to shareholders and that the separation will allow each business to achieve its best opportunities for growth,” continued Nash.
As previously announced, the L Brands Board has been evaluating the possibility of either a spin-off or sale of Victoria’s Secret with input from its financial advisors, Goldman Sachs and JP Morgan. Throughout the review process, the company received interest from and held discussions with multiple potential buyers.
Ultimately, the Board concluded that the spin-off of Victoria’s Secret into a separate, public company would provide shareholders with more value than a sale. The benefits of separating these two businesses include distinct strategic and management focus on specific operational and growth priorities and tailored capital deployment strategies based on each company’s operating and financial model, and the ability for the investment community to value each business independently and create significant value and certainty for our customers, employees and shareholders. The proposed transaction will create two highly focused companies.
Both businesses have strong, well-tenured leadership teams with significant industry experience, well suited to lead the two companies going forward in their distinct markets.
Andrew Meslow, Chief Executive Officer of L Brands, will continue to hold this position and lead Bath & Body Works following the spin-off. Martin Waters, Chief Executive Officer of Victoria’s Secret, will continue to lead the new standalone Victoria’s Secret business following the separation.
Additions to the management teams and the composition of the boards of directors for both companies will be named in due course.
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The spin-off is expected to be effected through a pro-rata distribution to L Brands shareholders of common stock of a newly-formed entity holding certain assets and liabilities comprising the Victoria’s Secret business. The spin-off is generally expected to qualify as tax free to L Brands and its shareholders for U.S. federal income tax purposes.
The transaction is currently expected to be completed in August 2021, subject to certain customary conditions, including final approval of the L Brands Board and effectiveness of a Form 10 registration statement filed with the U.S. Securities and Exchange Commission.