Ascena builds megasized womenswear business with $2bn Ann buy, creates $7bn-plus retail operation

There’s big and then there’s Ascena big. The US retail group Monday paid $2.15bn to become even more of a womenswear powerhouse in the US with the purchase of smaller peer Ann Inc.

Adding the accessible fashion brands Ann Taylor and Loft to its more middle-of-the-road portfolio, which includes Dressbarn, Catherines, Maurices, Justice, and Lane Bryant, the group now has a massive say in how US women dress.

How so? Well in real terms that translates into 4,900-store group with sales of around $7.3bn annually. We’ll give you a few seconds to digest those figures.

OK, let’s move on. Ascena CEO David Jaffe confirmed the deal will make his company “North America’s largest and most diversified speciality apparel retailers with a tremendous set of opportunities to continue to expand its leadership position in the women’s apparel market.”

The deal will also generate “significant cash flow,” Ascena noted.

“This powerful transaction joins two strong and highly complementary organisations and management teams,” he added.

Under the deal, Ascena will pay cash and stock worth $47 a share at Friday’s closing price, a 21.4% premium. After closing, Ann shareholders will own 16% of Ascena.

While the buyer’s shares were little changed at $14.22 Ann’s stock jumped 20% to $46.28 on the news.

Already super-keen on sourcing and distribution efficiencies, Jaffe said the Anne buy will allow Ascena to make a further $150m in annual cost cuts after three years. It also expects to adopt some of Ann’s successful online strategies that has seen 20% of its sales derive from e-commerce.

Although Ann has been struggling to make headway in a tough US retail landscape, Jaffe also said both Ann Taylor and Loft were strong brands that could do well.

“It’s been a rough time the last few years [but] quality will win out,” Jaffe said on a conference call with analysts.

Kay Krill, chief executive of Ann, also said the deal would give it a “powerful” financial base.

“As a member of the Ascena family, Ann will be poised to further enhance and grow our business,” she said.

The deal is expected to close in H2 after approval from Ann’s major shareholders.

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