Dress Barn Lassos Tweens

Even specialty apparel retail is getting hit with the acquisition bug.

Dress Barn (Nasdaq: DBRN  ) is acquiring Tween Brands (NYSE: TWB  ) in an all-stock transaction. Tween Brands stockholders will receive 0.47 shares of Dress Barn for every share they own.

Wall Street likes the deal. Usually you'll see an acquiring company's stock take a hit as its buyout target rises in a stock deal, but the market was sending both stocks higher this morning.

Maybe Mr. Market is just in shock. For starters, most specialty retailers have been heading in the opposite direction and shedding concepts lately. Abercrombie & Fitch (NYSE: ANF  ) is undoing its Ruehl chain. Talbots (NYSE: TLB  ) is dumping J. Jill and handing it over to a private equity firm. And Aeropostale (NYSE: ARO  ) is kicking Jimmy'Z to the curb.

There's also the odd pairing of the preteens who flock to Tween's Justice and Limited Too shops with the older clientele at Dress Barn's 841 eponymous stores. Dress Barn also owns maurices -- a 716-unit "authority for the savvy, fashion-conscious customer with a twenty-something attitude" -- but that's still at least half a generation away from Tween's pint-sized clientele.

But maybe Dress Barn is on to something by chasing the preteen market. One of the few new concepts to launch this year is Aeropostale's P.S., which aims squarely at the Jonas Brothers-loving 7- to 12-year-old demographic. 

It also helps that Dress Barn expects this deal to be accretive in future years, after simply being neutral to the company's bottom line this year. For those scoring at home, Tween Brands is one of the many companies that Limited Brands (NYSE: LTD  ) has spun off over the years, the best-known being Abercrombie & Fitch in 1996.

I've been shaking my head at the retailers that are cutting back these days, because they're missing the point. Mall landlords have a lot of empty spaces to lease out, and shoppers have fewer choices. Sure, a lot of that traffic is gravitating online, but you'll never get better lease terms out of desperate mall owners than you will right now.

It's a time to grow, with or without the tweeners. So I applaud this deal, as peculiar as it seems.

A tip of the hat to the concepts going away:

Longtime Fool contributor Rick Munarriz is always on the hunt for a good retail bargain. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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