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Report: J. Crew Considering Going Public This Year

Report: J. Crew Considering Going Public This Year

First lady, Michelle Obama is a big fan of clothing retailer, J. Crew. The company will need to pick up quite a few more supporters if it decides to go public later this year, as reported by Bloomberg.

While nobody is talking on the record, including TPG spokesman Owen Blicksilver and Margot Fooshee of J. Crew, sources told Bloomberg the company was in the process of interviewing banks and weighing initial public offering options.

The company, J. Crew Group Inc., is owned by TPG Capital and Leonard Green & Partners LP.  J. Crew has 451 stores and generates about $2.4 billion in sales annually. One Bloomberg source said the company could end up valued as high as $5 billion, almost double J. Crew’s buyout selling price of $2.64 billion in 2010.

At that time, TPG and Leonard Green agreed to pay $43.50 per share, to take the then-public company private. That deal riled shareholders, who sued CEO Mickey Drexler and other J. Crew executives -- saying that because they stood to pocket millions they made no real effort to seek higher bids.

J. Crew settled the lawsuit for a total of $22.5 million, including legal fees.

Related: Not Dead Yet: 3 Retailers That Are Apparently Defying The Odds

As for current efforts, Bloomberg sources said J. Crew was trying to obtain a $1.57 billion loan to refinance debt and working with both Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS).

Quartz reported that, in comparison with other specialty retailers, J. Crew’s performance was “hardly spectacular.” Still, sales last year rose nine percent -- while Gap (NYSE: GPS), which owns Banana Republic, generated growth of just five percent and Ralph Lauren (NYSE: RL) was up only about 4.4 percent in the nine months ending Dec. 2013.

Jim Cramer’s The Street pointed out that, if the company does go public, it would look better if IPO proceeds went toward reducing debt, rather than into sellers’ pockets.

In addition, when selling shareholders keep their stakes they telegraph confidence in future growth as opposed to appearing to just “take the money and run.” This, in turn, inspires new investors to show more interest in buying shares during the IPO according to The Street.

If J. Crew does go public, it will hope to emulate the success of others in the fashion retail sector that went public recently, including 2011’s Michael Kors (NYSE: KORS), with a 52-week range of $51.63 to $101.04 per share,  and Vince (NYSE: VNCE) -- which went public in 2013 and soared 43 percent in its trading debut.

At the time of this writing, Jim Probasco had no position in any mentioned securities.


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