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Hot Topic Red Hot on Acquisition by Sycamore Partners

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Hot Topic (NASDAQ: HOTT) announced Thursday that it will be acquired by New York-based private equity firm Sycamore Partners.

Under the deal, Sycamore will purchase the apparel chain for $14 per share. The purchase will total around $600 million.

The transaction, which has been unanimously approved by the Hot Topic board of directors, represents an approximately 30 percent premium over the closing price on Wednesday. It will be a one-step merger with Hot Topic as the surviving corporation.

Lisa Harper and Becker Drapkin Management LP, holders of 8.9 percent of Hot Topic's stock, have signed support agreements indicating they'll accept the deal.

Another New Outfit for Sycamore Partners

The Hot Topic acquisition is the third apparel-related deal in the past 16 months for Sycamore.

In November of 2011, Sycamore acquired 51 percent ownership of Mast Global Fashions. Mast is the third-party apparel sourcing division of Limited Brands (NYSE: LTD). Limited Brands is a fashion retailer and owns the wildly-popular Victoria's Secret chain.

Then, in August of 2012, Sycamore announced that TLB Merger Sub Inc. (an affiliate of the company) completed its acquisition of The Talbots, Inc. for approximately $391 million. The Talbots sells women's apparel, shoes and accessories.

Hot Topic Heats Up to Six-Year High

Hot Topic has had a bit of a ho-hum experience in the stock market over the past several years.

The City of Industry, California-based company eclipsed $14 in intraday trading on January 3, 2007 - the first day of trading that year. Since that time, it has yet to do so again.

After hovering in the low-teens through the first half of 2007, the stock gradually declined and finished the year below $6. The stock did not eclipse the $10 mark again until March of 2009 and even fell below $5 at times.

From then on, it has been a roller coaster ride for the company, with the stock experiencing gradual climbs and downslides while hovering in the $5 to $10 range most of the time.

Now, after hovering in the $10 to a bit over $11 range for most of 2013 thus far, Hot Topic is closing in on $14 per share. It is at its highest point in over six years.

Hot Topic is up around 29 percent on Thursday.

Posted-In: Sycamore Partners TalbotsNews M&A Best of Benzinga

 

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