Bloomberg News

J. Crew’s $16 Million Settlement Over Buyout Approved

December 15, 2011

(Updates with company response in fifth paragraph.)

Dec. 14 (Bloomberg) -- J. Crew Group Inc. won court approval of a $16 million settlement that resolves investor lawsuits over the retailer’s buyout by two private-equity firms.

Delaware Chancery Court Judge Leo Strine found today that the accord over the $3 billion buyout of the New York-based chain by TPG Capital LP and Leonard Green & Partners LP was “fair and reasonable,” said Mark Lebovitch, a lawyer for shareholders who sued over the deal.

“This was a good result for J. Crew investors,” Lebovitch said in a telephone interview.

TPG, based in Fort Worth, Texas, and Los Angeles-based Leonard Green agreed in November 2010 to buy J. Crew for $43.50 a share. The company operates 250 retail stores and 85 factory outlet locations, as well as a catalog business. A majority of J. Crew’s shareholders voted to approve the buyout in March.

Diego Scotti, a J. Crew spokesman, and Cody Franklin, a Leonard Green spokesman, also didn’t return calls seeking comment on the approval of the settlement. Owen Blicksilver, a TPG spokesman, declined to comment.

J. Crew shareholders sued last year contending Chief Executive Officer Millard Drexler, who began negotiating with the buyout firms months before the deal became public, didn’t get a fair price for the retailer.

Drexler and other J. Crew executives stood to make millions of dollars in the buyout by the private-equity firms, prompting them to only half-heartedly seek higher bids, the shareholders claimed in court papers.

Original Settlement

The investors also alleged Drexler used his executive clout to create a sale process that excluded all potential buyers except TPG and Leonard Green, blocking other bidders from making better offers.

An original $10 million settlement in the case fell apart in February after investors alleged J. Crew and fund officials didn’t live up to their agreement to properly solicit other offers. The parties agreed to the $16 million accord in August.

Strine approved $6.5 million in fees for lawyers of J. Crew shareholders who sued over the deal. Officials at J. Crew and the private-equity firms agreed to the fee request, according to court filings.

That $6.5 million is in addition to the $16 million paid to shareholders, Stuart Grant, a lawyer for J. Crew investors who sued over the buyout, said in a telephone interview today.

The case is In re J. Crew Shareholders Litigation, 6043, Delaware Chancery Court (Wilmington).

--With assistance from Phil Milford in Wilmington, Delaware. Editors: Stephen Farr, Fred Strasser

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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