June 13 - Struggling youth apparel retailer Express responded to a buyout offer from private equity firm Sycamore with a defense aimed at making a takeover difficult. But one analyst believes a deal will get done. Fred Katayama reports.
A private equity firm with a huge appetite for retailers now wants to buy Express. Sycamore Partners says it has bought a 9.9 percent stake in the slumping retailer and now wants to buy the rest. Express, which sells trendy fashions to twenty and thirtysomethings, quickly responded with a poison pill aimed at diluting the shares held by an acquirer. But investors seem to be expecting a deal of some kind. They sent the shares sharply higher at the start of trade, paring the stock's 27 percent loss this year. Brean Capital jacked up its price target by 25 percent, betting that Express will shop itself around. Analyst Eric Beder said, "We believe, given the strong assets of Sycamore and their sizable stake, that a deal will occur. We would expect a transaction to be announced by year-end." Express has been closing stores to pump up its shrinking profit as it battles weak traffic and deep discounting at malls. Beder said specialty retailers like Express are ripe for buyouts by private equity firms, citing American Eagle Outfitters, Abercrombie & Fitch, Guess, and Coach. Sycamore, which already owns brands like Talbots and Hot Topic, just added Coldwater Creek to its lineup this week before taking aim at Express.