Victoria’s Secret Buy Invalid After Staff Furloughs, Lawsuit Says

Victoria's Secret

Sycamore Partners, the private equity firm seeking to buy out Victoria’s Secret, is now looking at backing out of the deal after the retailer closed its U.S. locations and let go most of its staff in response to the coronavirus pandemic, according to a report in The Wall Street Journal.

That move, made by parent company L Brands, also included not paying April rent, a decision now commonly made by businesses not making money during the pandemic. Sycamore Partners is arguing in court that all of this has violated its agreement to buy Victoria’s Secret.

The deal between L Brands and Sycamore Partners was made in February, and entailed the sale of a controlling stake in Victoria’s Secret and its Pink brand for $525 million, and for longtime leader Leslie Wexner to step down. At that time, the value of the brand was $1.1 billion.

Earlier this month, Sycamore tried to renegotiate the deal, the report said, but L Brands would not renege on the original price, according to a court filing in Delaware on Wednesday, April 22.

In the court filing, Sycamore Partners says the furloughs and the rent issue made the deal invalid. Sycamore Partners said it intended to vigorously pursue action and would pursue any legal avenue possible to ensure contractual rights were upheld.

The coronavirus has proved a great force against potential mergers that had been talked about with optimism just a few months ago.

Some of the deals already planned have fallen out, like aerospace suppliers Hexcel and Woodward, which both agreed to focus on the pandemic for the time being.

The case of Bed Bath & Beyond’s Pmall business, in talks to be purchased by 1-800-Flowers, has not been so amicable. Bed Bath & Beyond is taking 1-800-Flowers to court over the latter’s decision to delay the deal over a lack of funds due to the coronavirus crisis.

Statistics from Dealogic show that merger activity is 57 percent lower as opposed to a year ago, now sitting at $233.7 billion.