Victoria Dumped: PE Firm Sycamore Seeks To Scrap L Brands LBO

On February 20, Wall Street woke up to a surprising headline: private equity giant Sycamore Partners was buying a 55% interest in L Brands, the holding company behind Victoria Secret and Pink, for $525 million an acquisition that valued L Brands at $1.1 billion and came at a time when traditional retail was already suffering from shrinking margins and sliding traffic, and was about to suffer the unprecedented devastation of the coronavirus pandemic that was about to hit the US retail space front and center.

"We believe the separation of Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK into a privately held company provides the best path to restoring these businesses to their historic levels of profitability and growth," said Leslie Wexner, chairman and CEO of L Brands - and one of Jefrey Epstein's closest confidants.

Exactly two months ago, Victoria has been dumped because Sycamore finally did its due diligence and found that blowing $1.1 billion on a melting ice cube wasn't the most prudent use of capital. As a result, on Wednesday the PE firm announced it wants to scrap its plans to LBO Victoria’s Secret, a buyout which was reached weeks before the coronavirus pandemic prompted the struggling chain to close its U.S. stores.

Syacmore - clearly seeking a Materially Adverse Condition out - said the decision by L Brands to close its U.S. stores in March, furlough the majority of its workers and skip April rent payments - as if it had any choice in doing so in an economy that was effectively shut down - were violations of the proposed transaction, according to a lawsuit filed by Sycamore in a Delaware court Wednesday. The firm is seeking the court’s blessing to break the deal.

L Brands responded that said it believes the termination of the transaction is invalid and that it “will vigorously defend the lawsuit and pursue all legal remedies to enforce its contractual rights.” The company said it would continue to work toward closing the deal.

In kneejerk response, the stock of L Brands tumbled 20% before being halted, and has continued to slide after the halt was lifted as investor realize that Victoria has now been dumped.

And just to make sure another PE firm doesn't make the same mistake, here is what we would like to call "due diligence":