| Transactions:
CASE STUDY: Lands’ End
Client
Lands’ End, based in Dodgeville, Wisconsin, is a premier direct, multi-channel merchant of traditionally inspired, classically styled casual apparel and home products for men, women and children.
At the time of our engagement, Lands’ End was the largest specialty direct merchant of apparel in the U.S. and traded on the New York Stock Exchange. Lands’ End had total revenues of $1.6 billion and a market capitalization of $1.5 billion.
Assignment
To find an alternative to meet the objectives of the Founder and Chairman, management and the Board of Directors. Considerations:
| 1. |
Mr. Gary Comer (through related trusts) owned 55% of the company and was no longer active in day to day operations of the company. His ownership stake represented a significant portion of his wealth and he was interested in diversification and philanthropy. |
| 2. |
Current management was seeking a strategic or financial partner to assist in developing a stronger retail presence. |
| 3. |
Mr. Comer and management wanted to maintain Lands’ End’s high quality brand image and product offering in addition to preserving its commitment to employees and a collaborative work culture. |
PJSC recommended that Lands’ End pursue a narrow and confidential sale process. Challenge
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Obtain maximum value to shareholders despite a falling stock market and difficult economic environment. |
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Create a competitive auction process despite the limited number of buyers who could afford to buy a business of such a large size and pay a premium to the stock price. |
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Explain the recent operational turnaround and the failed attempt to sell the company two years prior. |
Process
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In a short time frame, PJSC contacted and/or met with over 50 potential buyers worldwide. To minimize management distraction and to maintain confidentiality, PJSC vetted potential buyers’ interests and issues before allowing them to participate in the sale process. |
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PJSC managed the diligence process which included providing confidential information memoranda, arranging management meetings, monitoring data room visits and coordinating the distribution of additional diligence information for selected potential buyers. |
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PJSC enforced a strict and concise timeline for preliminary and final bids. |
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After final offers were received, PJSC assisted management and the Board in evaluating the qualitative and quantitative aspects of the proposals and in negotiating terms of a transaction with the preferred buyer. |
Results
On May 13, 2002, Lands’ End announced the agreement to sell to Sears Roebuck & Co. for $1.9 billion in cash. The sale price represented:
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A significant premium to the company’s trading share price |
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A multiple of 12.0x Lands’ End’s latest twelve months EBITDA |
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A multiple of 23.0x Lands’ End’s forward P/E (calendar year 2002) |
The sale gave Lands’ End the ability to place its merchandise in 870 Sears department stores across the U.S., a significant growth opportunity for all of Lands’ End’s product lines including apparel, footwear and home products. In addition, Lands’ End has maintained its identity as an independent catalog and website operation. Sears merchandise is not offered in Lands’ End’s catalog or on the website, but Lands’ End benefits by links between the Sears and Lands’ End websites.
Sears became the exclusive retail distributor of Lands' End merchandise, an important element of its overall apparel strategy. Through the acquisition, Sears enhanced its apparel portfolio with a strong brand that resonates with its core hardline customers seeking high quality at value prices. The performance of the Lands’ End brand in Sears stores demonstrates its good fit with the Sears portfolio. In stores where Lands’ End merchandise has been introduced, comp store sales performance has improved. For the second quarter ended June 28, 2003, Sears management announced that comparable store sales were 2 to 4 percent better in stores carrying Lands' End merchandise compared to those that didn’t yet carry the brand.
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