ascena Buys ANN Inc.

ascena retail group, inc. will acquire ANN INC. (NYSE: ANN) for a combination of cash and stock in an accretive transaction.

Upon closing, ANN INC. stockholders will receive $37.34 in cash and 0.68 of a share of ascena common stock in exchange for each share of ANN common stock.  Based upon the closing price of ascena stock on May 15, 2015, this implies a price per share of $47.00, a 21.4 percent premium over the closing price of ANN shares on Friday, May 15, 2015.  At closing, ANN stockholders will own approximately 16 percent of ascena.

The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close in the second half of 2015, subject to customary closing conditions, including, among other things: the expiration or early termination of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 and approval of the merger by the holders of a majority of the outstanding shares of ANN.   The transaction does not require approval by ascena stockholders.

"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," said David Jaffe, ascena's president and CEO. "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."

ascena has identified $150 million in annualized run rate synergies in the combination that it expects to generate over a three-year period.  The transaction aligns with ascena's platform strategy and shared services model, designed to enable an effective, rapid and comprehensive back office integration process. Synergies include sourcing and procurement, distribution, logistics and other efficiencies.  Excluding transaction and integration expenses, the acquisition is expected to be significantly accretive to EPS in the first year post closing, accelerating to greater than 20 percent accretion to EPS thereafter.  Additionally, ascena expects the combination to generate significant cash flow while both maintaining appropriate levels of capital expenditures and enabling rapid deleveraging.

"I am very proud of all we have accomplished and confident that combining with ascena is the right next step for ANN INC," said Kay Krill, president and CEO of ANN INC. "The transaction will make us part of a larger organization with a diversified portfolio of brands focused on the women's apparel market, a strong operating platform and a powerful financial base.  I have tremendous respect and admiration for ascena's CEO David Jaffe, and our management team and I look forward to working alongside him and other senior members of the ascena team. 

"As a member of the ascena family, ANN will be poised to further enhance and grow our business as we continue to take steps to better strategically and operationally position our brands for the dynamics that are redefining the landscape of the women's specialty retailing industry," Krill continued. "At the same time, we look forward to continuing to meet our clients' wardrobing needs by delivering great product and a seamless brand experience across our multiple touchpoints."

Transaction details
Under the terms of the transaction, upon closing, ANN INC. stockholders will receive $37.34 in cash and 0.68 of a share of ascena common stock for each share of ANN INC. common stock, implying a price per share of $47.00 based on the closing price of ascena stock on May 15, 2015. The transaction gives ANN INC. an enterprise value of approximately $2.0 billion.

ascena intends to finance the acquisition through bank debt. Goldman, Sachs & Co. and Guggenheim Securities have arranged committed financing for the transaction.

Guggenheim Securities and Goldman, Sachs & Co. acted as financial advisors to ascena.  Proskauer Rose LLP acted as legal counsel to ascena in connection with the transaction.  J.P. Morgan Securities LLC acted as the exclusive financial advisor to ANN in connection with the strategic review process and the transaction.  Wachtell, Lipton, Rosen & Katz acted as legal counsel to ANN INC. in connection with the strategic review process and the transaction.
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