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L Brands calls off deal to take Victoria’s Secret private

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Parent company has its knickers in a twist due to Covid-19 shock

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L Brands (LB) the owner of Victoria’s Secret, has seen its deal scrapped with the private equity firm Sycamore Partners to take the retailer private. This comes just three months after reaching the $525m (£421m, €484m) agreement.

Although the move was widely expected, it does not appear to have been fully priced in. Sycamore Partners informed the company of its decision to pull out of the agreement last week and actually sued in order to terminate the deal. L Brands’ share price closed Monday trading up 0.33 per cent, but has fallen more than 8.70 per cent in pre-market Tuesday trading.

While Victoria’s Secret has struggled to maintain its momentum in recent years, Sycamore Partners’ rapid volte face is mostly attributable to the Covid-19 pandemic.

With the United States and Western Europe among the areas worst-affected by the novel coronavirus, the retailer was forced to shut up shop for the foreseeable future. The private equity firm alleged that this decision to shut stores and stop paying rents had violated the terms of arrangement. L Brands responded to the charges with a countersuit.

The L Brands’ declared intention to operate Victoria’s Secret as a separate entity while establishing its more profitable Bath & Body Works as “a pure-play public company” has done little to boost investor sentiment.

Although it still has a market capitalisation of $3.3bn, at around $11.20 in pre-market Tuesday trading, the company has sunk from its 2015 of almost $100.

The Jeffrey Epstein scandal has compounded this decline. Last year, Leslie Wexner, the 82-year-old billionaire who founded L Brands in 1963, has come under increased scrutiny for his close links to the disgraced financier.

Wexner, who gifted a $77m New York townhouse to Epstein for $0 in 1996, has since spoken of his embarrassment and declared to have been “taken advantage of by someone who is depraved”.

Despite the deal with Sycamore Partners falling through, L Brands stated that Wexner will still step down as CEO and chairman as previously planned, remaining a board member as chairman emeritus.

 

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