Aeropostale (NYSE: ARO) is a primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aeropostale stores and 4 to 12 year-old kids through its P.S. from Aeropostale stores. The company currently operates 864 Aeropostale stores in 50 states and Puerto Rico, 78 Aeropostale stores in Canada and 151 P.S. from Aeropostale stores in 31 states and Puerto Rico. In addition, through various licensing agreements, the company operates an additional 99 Aeropostale locations and one Aeropostale and P.S. from Aeropostale store. Aeropostale is headquartered in New York (www.aeropostale.com).
The senior secured credit facilities consist of a five-year $100 million term loan facility and a ten-year $50 million term loan facility that includes a sourcing arrangement with MGF Sourcing, a portfolio company of Sycamore Partners and one of the largest apparel sourcing, manufacturing, and supply chain companies in the world. Formerly part of L Brands, MGF Sourcing was acquired by Sycamore Partners in November 2011.
Under the terms of the agreement, Aeropostale will also issue convertible preferred stock to Sycamore Partners. The convertible preferred stock gives Sycamore Partners the right to acquire up to 5% of the company’s common stock at an exercise price of $7.25, the closing price of the company’s common stock on March 12, 2014. Combined with Sycamore Partners’ current ownership of Aeropostale’s outstanding common stock, Sycamore Partners’ ownership on an as-converted basis would increase to approximately 12.3% of the company’s outstanding common stock.
The sourcing partnership with MGF Sourcing will result in Aeropostale’s commitment to complete minimum merchandise purchases each year for ten years. As the company fulfills its minimum purchase requirements under the sourcing partnership, all amortization payments of the associated ten-year $50 million term loan facility will be fully rebated.
In connection with the closing of the transaction, the company has appointed two new members to its Board of Directors: Stefan Kaluzny, managing director at Sycamore Partners, and Julian Geiger, former Director and Chief Executive Officer of Crumbs Bake Shop and former Chairman and Chief Executive Officer of Aeropostale and, Arthur Rubinfeld is stepping down as a director of the company.
“We continue to believe there is tremendous value in Aeropostale’s business. We are very pleased to partner with the company’s other Board members and management team to help Aeropostale realize the full potential of its brand,” said Mr. Kaluzny.
In addition, the company’s Board of Directors will nominate Kenneth Gilman, currently a director of Zale Corporation and Kate Spade & Co., for election by the company’s stockholders as an independent director at the company’s annual stockholder meeting this year. Mr. Gilman was mutually selected by the company’s Board and Sycamore Partners.
Sycamore Partners invests in consumer and retail companies. The firm has more than $1 billion of capital under management and is based in New York (www.sycamorepartners.com).
2014 PEPD • Private Equity’s Leading News Magazine • 5-27-14