L Brands Inc. plans to position Bath & Body Works as a standalone public company, while separating Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK into a privately-held entity. New York PE firm Sycamore Partners, which specializes in consumer and retail investments, will purchase a 55 percent majority interest for approximately $525 million.
Columbus-headquartered L Brands will retain a 45 percent minority 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, along with approximately $500 million in excess balance sheet cash, to reduce debt. L Brands expects its overall leverage, on an adjusted debt to EBITDAR basis, will be close to its current leverage ratio.
Sycamore has approximately $10 billion in assets under management. The firm’s investment portfolio includes Belk, Coldwater Creek, CommerceHub, Hot Topic, MGF Sourcing, NBG Home, Pure Fishing, Staples, Inc., Staples United States Retail, Staples Canada, Talbots, The Limited and Torrid.
L Brands Chairman and CEO Leslie Wexner 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 believes Victoria’s Secret will be better able to focus on longer-term results as a private company. Upon closing, Wexner will step down as CEO and chairman of L Brands. He will remain a member of the board as chairman emeritus.
Nick Coe, the current CEO of Bath & Body Works, will become vice chairman of Bath & Body Works Brand Strategy and New Ventures. Andrew Meslow, currently COO of Bath & Body Works, has been promoted to CEO of Bath & Body Works. At the close of the transaction, Meslow will become CEO of L Brands and join its board.
For nearly nine years Coe and Meslow have helped drive the Bath & Body Works brand to more than $5 billion in sales, Wexner stated.
L Brands’ board remains committed to governance enhancements, including a proposal to declassify the board and to eliminate the company’s supermajority voting requirements. The company has also demonstrated its commitment to board refreshment with new directors, such as last year’s election of Sarah Nash and Anne Sheehan. Three more directors will be retiring this year.
The company is extending its advisory agreement with Barington Capital Group L.P. and Barington Companies Equity Partners L.P. for an additional 12 months. The New York firm has provided input about board governance, corporate strategy and brand management.
BridgePark Advisors and PJT Partners are serving as financial advisers to L Brands and Davis Polk & Wardwell is serving as legal counsel. Kirkland & Ellis LLP is serving as legal counsel for Sycamore Partners.
