L Brands, Inc. (NYSE: LB) and Sycamore Partners, a private equity firm has announced a strategic transaction. The aim of the deal is 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 (collectively, Victoria’s Secret) into a privately-held entity focused on reinvigorating its market-leading businesses and returning them to historic levels of profitability and growth.
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.
As the deal goes through, there is word that CEO LeslieWexner is expected to step down from the retail empire he built with his purchase of Victoria’s Secret in 1982, and the lingerie brand plans to go private in a sale to Sycamore Partners that could be announced as early as Thursday.
L Brands shares declined 70 cents, or 2.9%, to $23.60.
