Victoria’s Secret, who is currently facing economic issues owned by L Brands, was sold to a private equity firm in a $ 525 million deal.
Sycamore Partners and L Brands will divide the brand control: the private equity firm buys a 55% stake, while L Brands will take control of the remaining 45%, and Victoria’s Secret will become a totally private company. The two companies announced the agreement on Thursday.
Leslie Wexner, the 82-year-old billionaire who has led L Brands for several decades, leaves his post as chief executive and director as part of the transaction. He will remain on the board of L Brands as president emeritus.
In a press release, Wexner said separating Victoria’s Secret into a private company “provides the best way to restore this business to its historic levels of profitability and growth.” He commended Sycamore for his “deep experience” in the retail industry and said it will bring a “new perspective and greater focus to the business.”
“We believe that, as a private company, Victoria’s Secret will be able to focus better on long term results. We are pleased that, by retaining a significant ownership interest, our shareholders will have the ability to participate significantly in the upward potential of these iconic brands,” Wexner said at the launch.
Once Victoria’s Secret separates, the main business of L Brands will be Bath and Body Works, a radical change for the company that used to own several well-known brands of shopping centers such as Abercrombie & Fitch, Lane Bryant and The Limited. The Victoria’s Secret split was proposed last March by Barington Capital, a hedge fund that has a small stake in the company.
Wexner was under intense scrutiny recently for his close ties to Jeffrey Epstein. The disgraced financier, whose death in prison last August was declared suicide, was the former Wexner personal money manager and a member of the Wexner Foundation, the Ohio-based Wexner charitable group. The businessman said he severed ties with Epstein in 2007. Wexner said in September 2019 that he was “ashamed” about the relationship.
Wexner news about the possibility of relinquishing control of the brand first appeared in January.
Victoria’s Secret has struggled throughout these years because it failed to adapt to the demand of consumers who asked for more custom bras and inclusive messages in their commercials. Although lingerie marketing trends have changed, Victoria’s Secret was mainly left with the same discourse that helped it dominate the industry: push-up bras and famous models.
The brand was also the focus of attention earlier this month for a New York Times revelation about alleged abuse against its models.
Sales at Victoria’s Secret stores that opened at least one year fell 10% in the fourth quarter, L Brands said Thursday.
The separation “will allow L Brands to reduce debt and focus on its strong main business of Bath & Body Works, which accounts for more than 80% of its operating income,” Moody’s vice president Christina Boni said in a note to investors.
“The transaction combined with cash in your balance will result in an estimated debt reduction of approximately US $1 billion and will mitigate the risk associated with changing Victoria’s Secret business,” he added.
Despite the optimistic tone of Sycamore and L Brands, the future of Victoria’s Secret is confusing given the lousy record that private equity companies have after taking control of major retailers. Charlotte Russe, Toys R Us, RadioShack, Payless Shoe Source, The Limited and, more recently, Barney’s, have closed thousands of stores.
L Brands shares fell 1% in the first operations. The shares had fallen by up to 15% in pre-market trade.