Talbots Surprising SPAC Merger (BPW, TLB)

The world of special purpose acquisition companies is already a strange one that offers a bit of individualized private equity via the stock market.  The deal between BPW Acquisition Corp. (AMEX: BPW) and The Talbots, Inc. (NYSE: TLB) is another strange deal in the SPAC universe.  Talbots is acquiring BPW Acquisition Corp., and the specialty retailer of women’s apparel will retain Talbots’ ticker symbol and will trade on the New York Stock Exchange.

Under the agreement, the proceeds of BPW’s cash (in its trust) of approximately $350 million will be used to retire all of Talbots’ existing debt.  Talbots will also acquire all of the outstanding shares of Talbots common stock held by AEON (U.S.A.), Inc., which represents a more than 54% stake currently.  This is in conjunction with additional financing obtained by Talbots, including a new $200 million revolving credit facility for which a commitment has been received from GE Capital.

BPW common shares will be exchanged for the equivalent of $11.25 per BPW share in Talbots’ common shares, but this is within a floating exchange ratio range of between 0.9000 to 1.3235 Talbots shares per BPW share.  The floating range will be based on the trading prices of Talbots common stock prior to the BPW stockholders meeting, and BPW’s shareholders will own between approximately 60-69% of Talbots’ common shares. The sponsors and certain directors of BPW will surrender an aggregate of 1,852,941 shares of BPW common stock, or approximately 30% of the shares held by the sponsors and directors, for no consideration.

Talbots will also undertake an exchange offer for existing BPW warrants held by public warrantholders. The exchange offer will provide that 50% of the BPW warrants held by public warrantholders will be exchanged for the equivalent of $1.125 per BPW warrant in Talbots.  This will also be in common shares through a floating exchange ratio of between 0.09000 and 0.13235 Talbots shares per BPW warrant based on the trading prices of Talbots common stock prior to the BPW stockholders meeting. The sponsors and certain directors of BPW have agreed to exchange all of their warrants for Talbots common stock at the same floating exchange ratio of between 0.09 and 0.13235 Talbots shares per BPW warrant.

Trudy Sullivan will remain President and Chief Executive Officer of Talbots, and will continue to lead the current management team.

Talbots stock is now up 14% at $8.23 and its 52-week trading range is $1.45 to $12.00.  Its market cap after today’s pop is listed as $453 million.  It seems that the world of SPAC investing gets more interesting and more creative with each deal.

Jon C. Ogg
December 8, 2009