Hot Topic Inc.
) and a privately held investment firm, Sycamore Partners have
agreed to collaborate, wherein the latter will acquire the former
in an all-cash transaction worth about $600 million. Following
the news, Hot Topic's shares shot up nearly 29%, closing trade at
$13.87 on Mar 7, 2013.
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Under the agreement, shareholders of Hot Topic will receive
$14.00 per share, representing nearly 30% premium to the
company's closing price of $10.75 on Mar 6, 2013. The transaction
has been structured as a one-step merger between the participants
and Hot Topic is proposed to be the surviving company.
The deal has received approval from the board of directors of
both companies. Moreover, Hot Topic's largest stakeholders, Lisa
Harper and Becker Drapkin Management LP, which own 8.9% of the
company's shares, have consented to the deal. The companies now
await the approval of Hot Topic's shareholders to close the
Hot Topic is seeking financial advice from Guggenheim Securities
and legal suggestions from Cooley LLP for the deal. On the other
hand, Sycamore Partners has hired Bank of America Merrill Lynch,
the corporate and investment banking division of
Bank of America Corp
), as their financial advisor and Winston & Strawn LLP and
the Law Offices of Gary M. Holihan P.C. for legal counsel.
Hot Topic is a mall and web-based specialty retailer operating
its namesake and Torrid concepts, along with the newly launched
Blackheart concept, across North America. Its core business
strategy focuses on music/pop culture related merchandise, based
on the foundation of pop culture and mainly targets customers in
the teenage group.
As of Feb 2, 2013, the company operated 618 Hot Topic stores
across 50 states and in Puerto Rico as well as in Canada, 190
Torrid stores and 5 Blackheart stores. The company's e-Commerce
business looks strong and it runs 3 e-Commerce sites -
hottopic.com, torrid.com and blackheartlingerie.com.
Currently, Hot Topic has a Zacks Rank #2 (Buy). Other stocks that
continue to perform well in the retail space are
Big 5 Sporting Goods Corp.
) , which has a Zacks Rank #1 (Strong Buy) and
), which carries a Zacks Rank #2 (Buy).