Josephine Skriver attends the debut of Victoria’s Secret’s new fall collection at Natick Mall on August 17, 2019 in Natick, Massachusetts.
Taylor Hill | Getty Images
Private equity firm Sycamore Partners will acquire a 55% share in Victoria’s Secret from its owner L Brands, the companies announced Thursday.
L Brands shares tumbled more than 10% after the deal was announced Thursday, likely a sign the market was disappointed in the valuation. L Brands, which has a market value of $6.7 billion, has seen its stock fall more than 11% over the past year.
Sycamore will pay $525 million for Victoria’s Secret, which L Brands will use, along with $500 million in excess balance sheet cash, to reduce L Brands’ debt.
The company also said Thursday that L Brands founder, Les Wexner, will step down as CEO and chairman of L Brands, though he will stay on its board. The departure is notable for Wexner who has long been closely intertwined with L Brands, but who has come under fire both for the company’s underperformance and his ties to the late sex criminal Jeffrey Epstein.
“I think about the endless possibilities ahead for this company. And I’ve thought about where I fit in the picture. In keeping with this same thoughtful examination, I have decided that now is the right time to pass the reins to new leadership,” wrote Wexner in an internal memo to the company obtained by CNBC.
L Brands also owns personal care chain Bath & Body Works, which it will continue to run as a separate company. The chain has long out-performed Victoria’s Secret, which has fallen out of favor with shoppers as they eschew its sexy styles. Upon the deal’s closing, the company will promote Bath and Body Work chief operating officer, Andrew Meslow, as its CEO.
It is also extending an agreement with activist fund Barington Capital Group, which disclosed a stake in L Brands last year. The firm last year had criticized the L Brands board for its close social ties and pushed the company to split its Victoria’s Secret and the stronger-performing Bath & Body Works businesses. L Brands last year agreed to add two new directors to its board and reached a truce with Barington that was set to expire this month.
L Brands, said Thursday it will continue to refresh its board. Board members Allan Tessler, Gordon Gee and Raymond Zimmerman will retire at the date of their annual meeting. L Brands has also engaged Heidrick & Struggles to help find new board members.
Andrew Meslow will join the board at the closing of the deal.
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Correction: Sycamore will pay $525 million for Victoria’s Secret. The deal puts a value on the brand of $1.1 billion.