May 10, 2013
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True Religion agrees to go private in $835 million deal

May 10, 2013

Premium jeans maker True Religion Apparel Inc said on Friday it has agreed to be acquired by investment management firm TowerBrook Capital Partners LP in a deal worth about $835 million.

TowerBrook will pay $32 per share in cash, representing a premium of about 9 percent to True Religion's closing price on Thursday.

The offer price is 52 percent above True Religion's closing share price on Oct. 9, 2012, the day before the company announced that it was exploring strategic alternatives.

The company, known for its high-priced jeans sold at specialty boutiques and upscale department stores like Saks Inc and Nordstrom Inc, said in October that it might sell itself after attracting interest from potential buyers.

The deal represents a multiple of seven times earnings before interest, tax, depreciation and amortization for the last 12 months. That compares to a multiple of 10 times for other recent deals in the consumer and retail sector, according to investment bank Harris Williams.

True Religion has been struggling with weak demand as customers switch to lower-priced denim.

The deal is a bright spot amid a slew of failed sales processes in the premium denim sector.

Auctions within the last year for private denim companies NYDJ and Hudson Jeans failed to yield buyers, sources previously told Reuters.

The sales process for True Religion took seven months, the company said.

The company's board unanimously approved the deal and recommended that shareholders vote in favor of the transaction, which is expected to close in the third quarter.

"TowerBrook's long-term approach toward investment and brand stewardship will best enable True Religion to maintain its leadership position in the marketplace," said Lynne Koplin, True Religion's interim chief executive.

Shares of True Religion were trading up 7 percent at $31.63 near midday on Friday.

TowerBrook's experience with retail brands includes Jimmy Choo, the maker of luxury footwear and accessories, which TowerBrook sold in 2011 after having acquired it in 2007. It had also owned Odlo Sports Group, a European sportswear maker that it acquired in 2006 and sold in 2010.

True Religion's founder, Jeffrey Lubell, stepped down as chairman and chief executive in March to "seek new creative endeavors."

True Religion announced first-quarters earnings on Friday, reporting a 13.1 percent increase in net sales to $120.8 million. Its operating margins, however, shrunk to 2.5 percent from 16.1 percent.

TowerBrook said it has committed financing from Deutsche Bank, Jefferies, UBS Investment Bank and Macquarie Capital.

Guggenheim Securities served as the financial adviser to True Religion, while Greenberg Traurig and Akin Gump Strauss Hauer & Feld were legal advisers.

Deutsche Bank, Jefferies and UBS Investment Bank acted as financial advisers to TowerBrook, and Wachtell, Lipton, Rosen & Katz was the legal adviser.

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