L Brands slams Sycamore for bargaining down Victoria’s Secret price

April 24, 2020

L Brands returned Sycamore’s legal effort to get out of its agreement to buy Victoria’s Secret with a lawsuit of its own on Thursday, saying that the private equity firm is inappropriately leveraging the COVID-19 epidemic to renege on their deal, or get a better one.

The companies agreed in February that Sycamore would get a 55% interest in Victoria’s Secret for about $525 million and take the brand private, with the retailer keeping a 45% stake. But on Wednesday, Sycamore told L Brands the deal was off, and took to court to enforce that.

Some analysts have downplayed Sycamore’s attempt, noting that L Brand’s actions were all in response to the COVID-19 outbreak — in some cases arguably prudent and in others (as with some store closures) mandated by state or local governments. But other experts, including Alon Kapen, a partner at law firm Farrell Fritz, saw potential in it, in part because, with an agreement between them and a transaction pending, L Brands may have needed to consult with Sycamore in making some of those decisions.

Kapen said to expect more buyers to try to get out of deals due to business disruptions caused by the outbreak. “This is a perfect example of that. Sellers are going to justify whatever action they took or did not take with respect to the conduct of their business,” he said in an interview. “This has the additional twist, that the seller says the buyer consented to it. That’s not always going to be the case.”

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