Abandoning its efforts to salvage the deal through legal action, L Brands (NYSE:LB) said yesterday it agreed to terminate the sale of a controlling interest in Victoria's Secret. The acquisition, originally giving private equity firm Sycamore Partners a 55% stake in the lingerie brand, represented a chance for L Brands to divest Victoria's Secret in exchange for $525 million in cash.
Company statements describe the termination agreement as "mutual." Sycamore Partners emerges from the situation nearly unscathed, paying neither the original price agreed upon nor a termination fee. The private equity firm earlier claimed that L Brands' closure of Victoria's Secret stores during the COVID-19 outbreak damaged the brand's value and breached the terms of the sale.
L Brands abandoned its lawsuit against Sycamore Partners in part because, as incoming Board of Directors Chair Sarah Nash noted, the company wants to "focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore."
L Brands named its CFO Stuart Burgdoerfer as Victoria's Secret interim CEO. It is also working on "implementing significant cost reduction actions and performance improvements" at the lingerie brand. Current L Brands CEO Leslie Wexner will still step down and become the company's chairman emeritus, to be replaced by Bath & Body Works CEO Andrew Meslow.
While news of the sale's termination caused a nosedive in L Brands' share value, at least one BMO Capital Markets analyst, Simeon Siegel, boosted the company's stock to "outperform." Bucking negative sentiment, he explained, "...noise will dissipate and it will become harder to ignore underlying fundamental value," setting a $17 price target. L Brands is currently trading at around $11.