Exclusive: L Brands will spin off Victoria’s Secret
L Brands has decided to spin off Victoria’s Secret rather than sell it, DealBook is first to report. The company said last year it was considering separating Victoria’s Secret from the rest of its business, and we previously reported that it was testing private equity’s interest. Ultimately, sources say, L Brands has decided to split itself into two independent, publicly listed companies: Victoria’s Secret and Bath & Body Works. The deal is expected to close in August.
Bids didn’t match what Victoria’s Secret expects to get in a spinoff. DealBook hears that L Brands received several bids north of $3 billion. It turned them down, because it expects to be valued somewhere between $5 billion and $7 billion in a spinoff to L Brands shareholders. Analysts at Citi and JPMorgan recently valued Victoria’s Secret as a stand-alone company at $5 billion.
The pandemic torpedoed a sale last year for much less. That agreement, announced in February 2020 with the investment firm Sycamore Partners, valued Victoria’s Secret at $1.1 billion. Apart from a pandemic that was about to upend the retail industry, Victoria’s Secret was dealing with a series of challenges: a brand that had fallen out of touch, accusations of misogyny and sexual harassment in the workplace and revelations about the ties between Les Wexner, the company’s founder and former chairman, and Jeffrey Epstein. (Wexner stepped down as C.E.O. last year and said in March that he and his wife are not running for re-election on the company’s board.)
As the pandemic shuttered stores and battered sales, Sycamore sued L Brands to get out of the deal, and L Brands countersued to enforce it, heralding a spate of similar battles between buyers and sellers. Eventually, in May 2020, the sides agreed to call off the deal.
Dick’s Sporting Goods, Michaels and others were able to accelerate digital transformations that may have otherwise taken years. Direct sales at Victoria’s Secret in North America rose to 44 percent of the total last year, from 25 percent the year before. It’s unclear whether pandemic shopping trends will stick, and “it would be reasonable to expect some reversion,” Stuart Burgdoerfer, the L Brands C.F.O., said at a March event. “But I also think that people have very much enjoyed some of the benefits that were forced on us or triggered through the pandemic.”
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