Private Equity Firm That Agreed to Acquire Victoria's Secret Attempts to Withdraw Contract Due to COVID-19

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The COVID-19 pandemic is also affecting the acquisition of the famous lingerie brand 'Victoria's Secret.' Sycamore Partners, a private equity firm that agreed to purchase a 55% stake last February, has requested to withdraw from the contract, citing the impact of COVID-19.

According to the Wall Street Journal (WSJ) on the 22nd (local time), Sycamore Partners filed a lawsuit in Delaware court seeking permission to withdraw from the acquisition of the controlling stake in Victoria's Secret from L Brands.

Sycamore Partners had agreed to purchase a 55% stake in Victoria's Secret for $525 million last February. As a result, Leslie Wexner, CEO of L Brands and the longest-serving CEO among S&P 500 companies, also decided to step down.

However, due to the COVID-19 pandemic, all Victoria's Secret stores in the U.S. were closed last month, most employees were temporarily laid off, and rent payments were not made this month, Sycamore Partners explained in the complaint. It appears that Sycamore Partners perceived this as a decline in Victoria's Secret's value.

Accordingly, Sycamore Partners proposed renegotiating the contract with L Brands earlier this month, but L Brands reportedly refused, stating that they had "no obligation to renegotiate." L Brands issued a statement on the same day opposing the withdrawal of the contract and is expected to take legal action as early as the 23rd.

WSJ reported, "This will be a legal test to see whether a deal made before the COVID-19 pandemic can be withdrawn on the grounds of the pandemic." The global mergers and acquisitions (M&A) market has effectively come to a halt due to the COVID-19 crisis.

This content was produced with the assistance of AI translation services.