PE Investors Buying Retail at Low Prices

TPG Capital and Leonard Green & Partners have agreed to take J.Crew (NYSE: JCG) private in a transaction valued at about $3 billion. The PE firms will pay J.Crew shareholders $43.50 in cash per share of common stock, a premium of 29%. Post-transaction, TPG will reportedly hold a 75% stake in the apparel retailer, while LGP will hold a 25% stake. Debt financing for the deal is being provided by BofA Merrill Lynch and Goldman Sachs. TPG has backed J.Crew before, investing about $163.4 million in the apparel retailer in 1997.

Since the beginning of 2009, PE investors have invested in 75 retailers, according to the PitchBook Platform. 2010 has been a busier year for the industry compared to 2009 in terms of deal counts. So far this year, there have been 40 completed deals, up from the 36 completed during all of last year. However, the typical 2010 deal is only about half the size of the typical 2009 deal, as the median deal size has dropped from $61 million in 2009 to only $27.4 million this year. 63 PE investors have completed investments in the Retail industry since the start of 2009. The most active include Catterton Partners (5 deals), Sun Capital Partners (5) and Golden Gate Capital (4).