This holiday season Aéropostale may be on a number of shopping lists –and not for its fashion options.
Activist investors and potential suitors have been buying up shares of the struggling teen retailer in recent months.
On Tuesday, Aéropostale adopted a poison pill, but not to deter bidders. In a filing, the company said it put the poison pill in place to give the company and its shareholders enough time to assess any bid. Aéropostale didn’t return requests for comment Wednesday.
Aéropostale adopted the poison pill after investment firm Crescendo Partners said last week it held a significant stake in the retailer and said it should start weighing its go-private options.
Among Aéropostale’s other large holders are private-equity firm Hirzel Capital Management, which announced a 6% stake last week, and Eminence Capital, the fund pushing for a Men's Wearhouse deal.
Crescendo’s move comes a two months after private equity firm Sycamore Capital spent $54 million for an 8% of Aéropostale in September and said it would talk to the retailer’s board about future plans.
Sycamore hasn’t said anything on Aéropostale since then, and the firm’s spokesperson Michael Freitag declined to comment Wednesday.
So far, Sycamore seems to be following the playbook it used to buy Talbots, another struggling retailer. After buying up 9.9% of Talbots’ stock in August 2011, the firm bid $3 a share four months later. After months of negotiations, Sycamore walked away and only to return and scoop up Talbots for $2.75 per share.
“Sycamore is already seen as having the lead horse in owning the company,” said Ted Chen, a portfolio manager for Water Island Capital’s Arbitrage Event Driven Fund. “There are some worries that Sycamore’s interest could deter other bidders.”
Given Sycamore’s history with Talbots, Mr. Chen said he worries that Aéropostale’s falling profit margins could also scare off other bidders, leaving only Sycamore bidding. That could mean shareholders like Mr. Chen won’t see much of a bump in the offer price.
Aéropostale is currently trading under $10 a share and is down 25% in 2013.
Suitors may keep circling Aéropostale throughout the holiday shopping season, but Chen said it’s more likely that they’ll wait until the new year to actually bid on the company. Holiday shoppers or the lack of them can drastically change the fate of a retailer.
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