L Brands and Sycamore Agree to Terminate Victoria’s Secret Deal

The retailer and private equity firm mutually decided to cease litigation as Covid-19 continues to upend retail

The deal was to separate Victoria's Secret from its parent, and neither company will pay a termination or breakup fee. Getty Images
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L Brands has inked an agreement with Sycamore to terminate a deal in which the retailer planned to sell a 55% stake in Victoria’s Secret to the private equity firm for $525 million.

The two parties announced the mutual agreement Monday, and neither will pay a termination fee.

“In connection with the termination of the Victoria’s Secret transaction agreement, Sycamore Partners and L Brands agreed to settle all pending litigation and mutually release all claims,” the private equity firm said in a statement.

L Brands, however, plans to proceed with its decision to separate Victoria’s Secret from Bath & Body Works as a stand-alone company.

“Our board believes that it is in the best interests of the company, our stockholders and our associates to focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore,” said Sarah Nash, a director on L Brands’ board and future chair.

In addition, previously announced management changes will go into effect when the company holds its annual shareholders meeting on May 14, it said. Chairman Leslie Wexner will step down from his role and be replaced by Nash, but remain a member of the board as chairman emeritus. Andrew Meslow, the CEO of Bath & Body Works, will become CEO of L Brands and join the board.

The collapse of the deal is the latest example of how the Covid-19 pandemic is disrupting the retail industry.

Sycamore sent notice to the parent of the lingerie brand as well as Bath & Body Works of its intent to terminate the deal on April 22 and filed a lawsuit in the Delaware Court of Chancery seeking a judgment declaring the move valid.

L Brands said in a subsequent court filing that it would “vigorously defend the lawsuit and pursue all legal remedies to enforce its contractual rights.” Its complaint, filed with the Delaware court, cited the agreement’s material adverse effects (MAE) clause that excluded pandemics. The company did not immediately respond to requests for comment on its change of heart.

But Sycamore planned to argue that by not paying rent and furloughing employees, L Brands was not honoring its part of the agreement to continue to operate Victoria’s Secret in a manner consistent with how it managed the business in the past, a provision of the deal separate from the MAE clause.

In late February, the two parties struck a deal under which the private equity firm would acquire a majority stake in Victoria’s Secret in a transaction that valued the business at $1.1 billion.


@RichCollings richard.collings@adweek.com Richard Collings is a retail reporter at Adweek.
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