J. Crew may be weighing 2014 IPO

With 451 stores and about $2.4 billion in annual sales, the retailer may fetch a valuation of as much as $5 billion.

By MSN Money Partner Feb 26, 2014 2:00PM
J. Crew Collection antiqued floral top (© J. Crew)By Jodi Xu, Leslie Picker and David Welch, Bloomberg

J. Crew Group, the retailer owned by TPG Capital and Leonard Green & Partners LP, is interviewing banks as it weighs an initial public offering in the U.S. later this year, people familiar with the matter said.

With 451 stores and about $2.4 billion in annual sales, J. Crew may fetch a valuation of as much as $5 billion, one of the people said, asking not to be identified discussing private information. That's almost twice the $2.64 billion value of J. Crew’s buyout by TPG and Leonard Green three years ago.


As shares of retailers trade near record highs, IPOs of these companies have provided large returns for investors recently. Vince Holding Corp., the apparel company backed by Sun Capital Partners, has gained 33 percent since its November debut. Container Store (TCS), which is also backed by Leonard Green, is up 85 percent since its October IPO.


Owen Blicksilver, a spokesman for TPG, declined to comment on the IPO plans, as did Margot Fooshee, a spokeswoman for J. Crew. A representative for Leonard Green didn't reply to calls and e-mails seeking comment.


The buyout funds agreed to pay $43.50 a share, or almost $3 billion, for J. Crew in November 2010. Net of cash, the deal value was closer to $2.64 billion, data compiled by Bloomberg show. The takeover drew complaints from shareholders who claimed Chief Executive Officer Millard "Mickey" Drexler didn't get a fair price for the company.


The investors sued, alleging that Drexler and other J. Crew executives stood to make millions of dollars in the deal, prompting them to only half-heartedly seek higher bids, court papers show. New York-based J. Crew settled the suit for $16 million in addition to $6.5 million in legal fees.


The Standard & Poor's Retailing Index has jumped 35 percent over the last year and reached a record high in December. That's compared with a 24 percent rise for the Standard & Poor's 500 Index ($INX). The surge has come despite data showing that purchases at U.S. retailers declined in January by the most since June 2012, Commerce Department figures show.


J. Crew, whose customers include U.S. First Lady Michelle Obama, has been expanding overseas, with stores in London and Hong Kong. J. Crew estimated that its revenue increased 9 percent to $2.43 billion in the year through Feb. 1, according to a regulatory filing last week, and forecast that its adjusted earnings before interest, taxes, depreciation and amortization rose to between $369 million and $371 million, from about $360 million a year earlier.


The company is seeking a $1.57 billion loan to refinance debt, working with Bank of America (BAC) and Goldman Sachs (GS) on the transaction, a person with knowledge of the matter said last week. TPG and Leonard Green received at least two dividends of about $700 million from J. Crew since December.


The company operates 330 stores under the J. Crew, Crewcuts and Madewell brands in addition to 121 factory stores, the latest filing showed.


More from Bloomberg


Tags: BACGS
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

108
108 rated 1
257
257 rated 2
439
439 rated 3
626
626 rated 4
499
499 rated 5
530
530 rated 6
713
713 rated 7
522
522 rated 8
339
339 rated 9
136
136 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
SWNSOUTHWESTERN ENERGY COMPANY10
TAT&T Inc9
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.