Ascena Retail, Ann Shares Gain Big on M&A

Ascena Retail Group Inc ASNA, the operator of Dressbarn and Lane Bryant, agreed to buy Ann Inc ANN for $38.71 in cash and 0.68 per share in stock. The deal works out to a $2.15 billion price tag. Ascena wants to acquire Ann's LOFT and Ann Taylor stores to expand its women's brand.

At Friday's close, Ascena had a market capitalization just slightly higher than the value of the deal - at $2.31 billion. Ascena said the deal would be "significantly accretive" to earnings in the first year, while profits should gain by 20 percent annually in years following.

Ascena's president and CEO, David Jaffe, said the deal "dramatically reinforces our leadership position in women's specialty apparel retailing." He also noted that the deal will drive "immediate, significant and ongoing value" for shareholders.

Ascena's shareholders agree. The stock was trading up 7.3 percent in Monday's premarket, up to $15.25 from a close at $14.21 on Friday. Ann stock gained more than 22 percent following the announcement, with shares trading above $47 per share, up from a close at $38.71 on Friday.

Ascena said it will finance the acquisition through bank debt and that Goldman Sachs and Guggenheim Securities arranged the financing. The deal does not require approval from Ascena's shareholders.

Through Friday, Ann's stock gained 6 percent year-to-date, while Ascena stock gained 13 percent.