Why rue21 Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rue21 (NASDAQ: RUE) surged 23% today after private equity firm Apax Partners agreed to acquire the specialty apparel retailer for $1.1 billion.

So what: The all-cash deal values rue21 at $42 per share, and represents a 23% premium to its closing price on Wednesday. The news is right in line with the recent trend of cash-rich private equity firms looking to dive into the fashion retail space, suggesting that there's more upside in the sector than Mr. Market is currently discounting.

Now what: The deal is expected to close by the end of the year. "This transaction will allow us to focus on achieving our long-term objectives, including growing our business to over 1,700 stores in the U.S. and successfully implementing new initiatives such as e-commerce and rueMan," said rue21 Chairman and CEO Bob Fisch. So, while rue21 may now solicit competing bids for a 30-day "go-shop" period, holding out for a dramatically better offer seems a bit risky.

Interested in more info rue21? Add it to your watchlist.


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