– EN Fashion – Executives at a private equity firm due to acquire Victoria’s Secret now want to back out of the deal.
Back in February, bosses at Sycamore Partners had reached an agreement to buy a majority stake in the lingerie label from its troubled owner, L Brands.
The deal involved the firm acquiring a 55 per cent interest stake in the Victoria’s Secret lingerie, Victoria’s Secret Beauty, and Pink brands, which was valued at $1.1 billion (£891 million).
But according to a court filing made in the U.S. state of Delaware on Wednesday, Sycamore is looking to terminate the deal because of Victoria’s Secret’s response to the coronavirus pandemic.
The brand has closed stores and furloughed employees in response to the Covid-19 outbreak, and lawyers for Sycamore claimed that was a breach of the agreement.
They said bosses at L Brands had violated the terms of the deal, including the obligation to conduct “business as usual” and to refrain from changing “any cash management policies, practices, principles or methodologies”.
“That these actions were taken as a result of or in response to the Covid-19 pandemic is no defence to L Brands’ clear breaches of the transaction agreement,” said the firm in its filing, according to Reuters.
The move sent the company’s shares plummeting by almost 25 per cent before trading of the stock was temporarily halted.
In a statement, a spokesperson for L Brands called the proposal to terminate the deal “invalid”.
“L Brands will vigorously defend the lawsuit and pursue all legal remedies to enforce its contractual rights, including the right of specific performance,” they added.