Please ensure Javascript is enabled for purposes of website accessibility

L Brands' Share Price Collapses as Sycamore Seeks to Terminate Victoria’s Secret Acquisition

By Rhian Hunt – Apr 22, 2020 at 12:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The controversial lingerie brand continues to weigh on L Brands’ prospects.

Private equity firm Sycamore Partners may be looking to back out of its deal to buy a controlling stake in the Victoria's Secret lingerie brand, Reuters and other outlets report, and L Brands (BBWI 1.65%) stock is in free fall as a result. COVID-19 already hammered L Brands in March with retail store closures, sending its share value downward almost 50%. Now the current owner of Victoria's Secret has seen its stock collapse around 20% so far in today's trading.

Back in February, L Brands inked a deal with Sycamore that saw the latter agree to buy the troubled intimate apparel brand for $525 million. As part of the deal, founder and CEO Les Wexner would step down and move into an emeritus position, and Bath & Body Works CEO Andrew Meslow would take over as CEO of L Brands. The complex transaction would have ended with Victoria's Secret as a privately held subsidiary of Sycamore Partners.

A Victoria's Secret storefront.

Image source: L Brands.

Now, Sycamore Partners says L Brands' handling of Victoria's Secret following the deal violates its terms, and it no longer wants to go through with acquiring the half-billion dollar stake in the brand. Sycamore says that furloughing the majority of Victoria's Secret's workforce and shuttering most of its 1,600 outlets materially degrades the lingerie line's value.

In its court filing, the private equity firm argued that the coronavirus outbreak is no excuse, stating, "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." A 10% drop in L Brands' shares following the news triggered a temporary trading halt, but the downward slide resumed when trading started again.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bath & Body Works, Inc. Stock Quote
Bath & Body Works, Inc.
BBWI
$36.30 (1.65%) $0.59

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.