Private equity fund Sycamore Partners is trying to get out of its acquisition deal with L Brands, to take over a 55 % stake in lingerie brand Victoria’s Secret. The named reason/excuse is the fact nearly all stores are closed due to the corona crisis.
Conditions violated
Sycamore says that L Brands violates the conditions of the agreement worth 525 million dollars (480 million euros) by closing almost all of its 1,600 Victoria’s Secret stores. Moreover, the fund calls out the other “harmful” actions L Brands has taken, like furloughing employees and not paying rents.
“That these actions were taken as a result of or in response to the COVID-19 pandemic is no defense to L Brands’ clear breaches of the transaction agreement”, Reuters quotes from Sycamore’s court filing. L Brands has launched a counter-attack, saying Sycamore’s termination of the acquisition was “invalid”. The company will “pursue all legal remedies to enforce its contractual rights“, Reuters reports.
Eric Talley, professor at Columbia Law School, thinks that the two parties will find a compromise, most likely a renegotiation of the agreement. Based on the original agreement, reached in February, L brands would hold on to 45 % of Victoria’s Secret shares. This would enable the company to focus on its Bath & Body Works brand, which easily outperforms Victoria’s Secret.
