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Hot Topic Acquired by New York Private-Equity Firm
City of Industry, Calif.–based mall retailer Hot Topic Inc. was acquired by New York–based Sycamore Partners for $14 per share in a cash deal valued at $600 million.
Sycamore also owns contemporary retailer The Talbots Inc. and manufacturers Mast Globe Fashions and has more than $1 billion in capital under its management. Lisa Harper, Hot Topic’s chief executive officer, said the private-equity firm will guide the pop-culture retailer to new heights.
“We are pleased that this transaction will allow us to deliver positive results for our shareholders. In addition, we are very excited about the future growth for the company and know that Sycamore Partners will provide great resources and expertise to us as we operate as a private company.”
The initiative of taking Hot Topic private was put together as a “one-step merger.” However, the plan will be subject to shareholder and regulatory approvals. Shareholder approval will be sought at a special meeting of shareholders. Hot Topic’s fourth-quarter results will be discussed in a conference call on March 13. Harper and Becker Drapkin Management LP hold 8.9 percent of Hot Topic’s stock, and both parties signed agreements that they will support the proposed transaction.
Wall Street analyst Adrienne Tennant applauded the announcement. She moved her recommendation on Hot Topic’s stock from “neutral” to “buy.” “We believe, given the pressures on the softline sector and consumer, this is an attractive takeout,” Tennant wrote in a March 7 research note. Tennant works for Janney Capital Markets. “We commend management for the significant amount of work done over the last year in order to stabilize and turn the business and set the stage for renewed growth.”
The announcement is the latest chapter of Hot Topic’s comeback story. After a period of declining earnings that started in 2009, two activist investors, Steve Becker and Matt Drapkin of Becker Drapkin Management, joined Hot Topic’s board of directors in October 2010. In March 2011, Betsy McLaughlin, Hot Topic’s former executive, left the company, and Harper, a Hot Topic board director and former Gymboree Corp. chief executive, was named Hot Topic’s chief executive.
Hot Topic runs 618 Hot Topic stores in the United States, Canada and Puerto Rico; 190Torrid stores; five Blackheart stores; and Internet stores at www.hottopic.com,www.torrid.com and www.blackheartlingerie.com.
