Stein Mart has agreed to a buyout from an affiliate of private equity firm Kingswood Capital Management for $0.90 per share in cash. The transaction is scheduled to be finalized in the first half of 2020.
The purchase price represents a premium of approximately 38% over Stein Mart’s closing stock price of $0.65 per share on Jan. 30, the last trading day prior to the announcement.
The Stein family, now headed by Jay Stein, grandson of its founder and former CEO of Stein Mart, will retain an equity stake and indirectly own one-third of the retailer after it goes private.
Stein Mart, which labels itself as a specialty off-price retailer, hasn’t generated a sales increase since 2016, with sales in the first three quarters of 2019 dropping 3.7% and net losses reaching $10.2 million. The retailer has had trouble finding its footing as either an off-price/discount destination or a general merchandiser with a fashion focus. The company first explored strategic alternatives in January 2018, indicating that the Board of Directors had sought a financial and/or strategic partnership to keep the business afloat for at least two years.
The retailer took steps to strengthen its omnichannel capabilities over the past year, deploying mobile POS checkout nationwide in August 2019, launching BOPIS across all locations one month later and even hopping on the Amazon bandwagon by implementing Amazon Lockers at 200 of its 280+ stores. But all the moves appear to have come too late in the game to quell the fears of public shareholders.
With a private equity firm now in charge, there will certainly be even more speculation about the future of Stein Mart, depending in large part on the amount of debt the retailer takes on. High-profile bankruptcies including Toys ‘R’ Us, Payless, David’s Bridal and Gymboree all occurred under the ownership of private equity firms, with these retailers succumbing to massive debt loads that prevented them from properly reinvesting in their businesses.
When the transaction closes, Stein Mart common stock will no longer be listed or traded on any public stock market. The retailer had been in danger of being delisted from Nasdaq since July 2019, having until Jan. 6, 2020 to boost its stock price over the $1 per share mark. On Jan. 7, the company was granted an additional 180-day grace period to come back into compliance with Nasdaq’s minimum bid price requirement.
The transaction was unanimously approved by the Stein Mart Board of Directors (excepting Jay Stein). The Board acted on the unanimous recommendation of a special committee of independent directors that was granted full authority to conduct a comprehensive strategic review and evaluate and, if warranted, negotiate an acquisition proposal.