Are Ann Shareholders Getting Enough in the Buyout?

As the market is hitting all-time highs, many companies are expanding. In the process of this expansion, mergers and acquisitions play a large role. For example, Ascena Retail Group Inc. (NASDAQ: ASNA) announced Monday morning that it has entered into a definitive merger agreement with Ann Inc. (NYSE: ANN).

Under the terms of the agreement, shareholders of Ann will receive $37.34 in cash and 0.68 of a share of Ascena common stock for each share of Ann common stock. This is based on Friday’s closing price for Ascena’s stock and is equivalent to $47 per share of Ann, a 21.4% premium. At the closing, shareholders of Ann will own roughly 16% of Ascena.

This transaction was unanimously approved by both boards of directors, but it will be subject to regulatory approval.

David Jaffe, president and CEO of Ascena, commented on the acquisition:

This powerful transaction joins two strong and highly complementary organizations and management teams and dramatically reinforces our leadership position in women’s specialty apparel retailing. We are excited to further leverage our uniquely capable operating platform and exceptional combined talent to drive immediate, significant and ongoing value for our stockholders. With the addition of the Ann Taylor and LOFT brands, ascena will become one of North America’s largest and most diversified specialty apparel retailers, with a tremendous set of opportunities to continue to expand its leadership position in the women’s apparel market.

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Ronald Hovsepian, non-executive chairman of Ann, said:

Based on our Board’s thorough and wide-ranging review process, we are confident that this agreement with ascena is in the best interests of ANN INC.’s stockholders. Our stockholders will receive approximately 80% of the purchase price in cash, providing immediate and certain value, and also have the opportunity to participate in the upside of the combined company as a result of the stock portion of the purchase price.

Looking at the chart, we see that Ann hit a multiyear high back in March of 2014 at $43.61. The last time that prices were near that level was 2007.

Shares of Ascena closed Friday up 0.3%, at $14.21 in a 52-week trading range of $10.50 to $17.96. In premarket trading Monday, shares were up about 7.7% at $15.31. The stock has a consensus analyst price target of $15.55.

Ann closed Friday up 1.3% to $38.71. In premarket trading Monday, shares were up 19% at $46.14. The consensus analyst price target is $41.56, and the 52-week trading range is $31.69 to $42.96.

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