Please ensure Javascript is enabled for purposes of website accessibility

Why L Brands Stock Is Sinking Today

By John Rosevear – Apr 22, 2020 at 2:07PM

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

Its deal to unload Victoria's Secret is in peril.

What happened

Shares of retail holding company L Brands (BBWI -0.45%) were falling sharply on Wednesday, down 22.4% as of 1:30 p.m. EDT, after a private-equity firm that had agreed to buy the company's troubled Victoria's Secret chain filed suit to try to back out of the deal.

So what

In February, private-equity firm Sycamore Partners agreed to purchase a controlling stake (55%) in lingerie retailer Victoria's Secret from L Brands, in a deal that valued the chain at $1.1 billion. 

The entrance to a Victoria's Secret mall store.

L Brands' deal to unload the Victoria's Secret chain is in deep trouble. Image source: L Brands.

At the time, that was seen as something of a bargain-bin price, suggesting that L Brands really wanted to be done with the chain -- but that was before the coronavirus pandemic forced brick-and-mortar retailers to close their stores, pushing some big-name chains to the brink of bankruptcy. 

Now, Sycamore is having second thoughts: It filed a lawsuit in a Delaware court on Wednesday in which it asked a judge to terminate the deal. That would not be good news for L Brands, and it's why L Brands' shares are taking a big hit today. 

Now what

Retail investors who have followed the company won't be surprised to hear that L Brands plans to fight. It said in a statement that it will "vigorously defend the lawsuit and pursue all legal remedies to enforce its contractual rights," while continuing to work toward closing the deal as previously agreed.

Where does this leave investors? Watching and waiting. Stay tuned.

John Rosevear 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.
$35.29 (-0.45%) $0.16

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

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.