Months-long standoff between
Lululemon Athletica, Inc.
) and its founder Denis J. Wilson over taking control of the
premium yoga-inspired apparel retailer's board has finally come to
an end after the later entered into a stake selling agreement with
As per the agreement, Mr. Wilson will sell half of his current
27.7% stake in the company, or nearly 13.85% of the company's
outstanding shares to Advent for a sum of $845 million. The
company's board has appreciated Mr. Wilson's move and has fully
supported the transaction.
Furthermore, Mr. Wilson, Advent and Lululemon entered into a
combined agreement which authorizes Advent to appoint David M.
Mussafer and Steven J. Collins in Lululemon's board of directors
effective from the date of completion of stake sell. This will
increase the number of members in Lululemon's board to 12 from
Apart from this, Mr. Wilson and Advent have also agreed not to
fight for a proxy contest until the 2016 annual general meeting.
The measure has been taken to prevent both of them from taking or
supporting any kind of hostile step toward takeover of the
Founded in 1984, Boston-based Advent International has now
become one of the world's largest and experienced private equity
investors. The private equity firm had previously invested in the
company in 2005 till 2009, when it fully exited from its original
investment. Between these periods, Lululemon witnessed tremendous
growth and became a globally recognized premium yoga-apparel brand
from a regionally focused brand.
Mr. Mussafer and Mr. Collins have past working experience with
Lululemon, as both were board members during Advent's previous
involvement with the company. Mr. Mussafer, who is currently the
Managing Partner in Advent will join Lululemon's board as
Co-Chairman. On the other hand, the current Managing Director at
Advent, Mr. Collins will act on the board's Nominating and
Corporate Governance Committee.
As the standoff between the company and its founder reached to
an end and its agreement with Advent came to light, positive
sentiments spread across the market, with hopes that the company
will soon be back on growth trajectory. The shares of this
yoga-sportswear maker jumped over 6% during the after-hours trading
Lululemon has been in troubled waters since Mar 2013 when the
company was forced to recall its Black Luon yoga pants and crops
from its stores and e-Commerce site due to quality-related issues.
This created a lot of buzz in the press, which, coupled with
controversial comments from Lululemon's founder, that offended many
of its women customers, led to lower traffic trends in the
company's stores till so far, thus impacting the overall company
This was the time when the spat between the founder and the
Zacks Rank #5 (Strong Sell) yoga-related apparel retailer started.
However, Mr. Wilson stepped down from the post of chairman in Dec
2013 and apologized for his offending remarks.
Recently, in June this year, Mr. Wilson blamed Lululemon's
current Chairman and other board members for focusing too much on
short-term issues and therefore losing their sight for long-term
targets. This further ignited tensions between the two and raised
concern that Mr. Wilson may attempt to or support a hostile
takeover of the company.
The recent development has discarded all the speculations that
say the beleaguered yoga-apparel retailer may potentially be a
takeover target in the apparel retail industry, given the drastic
decline in share price and the ongoing troubles in its operations.
Lululemon would have probably fallen prey to the acquisition
aspirations of giant sports-related apparel retailers like Nike
), V.F. Corp. (
) and Columbia Sportswear Co. (
), all of which are looking for opportunities to expand into the
yoga product line.
While the troubles for Lululemon seem to be getting closer to
the finish line with the recent development, we would like to see a
meaningful impact of these developments on the company's operating
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