Apax buys US fashion retailer (again) for $1.1bn

The firm will acquire clothing retailer rue21 using capital from its Fund VIII, which is targeting close to €6bn. Apax previously owned a majority stake in rue21, which filed for a $125m IPO in 2009.

Apax Partners will take US specialty apparel retailer rue21 private in a transaction valued at $1.1 billion.

At a price of $42 per share, the transaction represents a 23 percent premium over Wednesday’s closing price. rue21 sells branded clothing merchandise and operates 932 stores in 47 states. 

Apax declined to comment on the transaction.

The firm is investing in rue21 from its Fund VIII, which is currently in market targeting close to €6 billion. Apax held a first close on €4.3 billion for the fund in March. It had initially set out to target €9 billion before reducing the figure to around €6 billion.

Apax’s investment in rue21 is not the first time the firm has owned a majority of the company. Prior to rue21’s $125 million initial public offering in 2009, Apax owned a 63.4 percent stake in the business. 

rue21

One of the shareholders that will sell its stake in rue21 as a part of Thursday’s transaction is the SKM II funds, an investment vehicle of former US mid-market firm Saunders Karp & Megrue. The SKM II funds owns about 30 percent of the fashion retailer and  “have been associated with Apax” since 2005, according to a statement, when Apax absorbed Saunders Karp & Megrue. rue21, previously known as Pennsylvania Fashions, filed for bankruptcy in 2002 before re-emerging in 2003 and represents the last remaining investment of the SKM II funds.

Apax has completed a number of large investments using capital from Fund VIII, including the $570 million acquisition of footwear retailer Cole Haan last November and the $1.1 billion take-private of Garda World Securities last September.

Rue21’s take-private follows three other private equity deals agreed this month valued at or near the $1 billion mark. Last week, UK-based Pamplona Capital Management acquired laundry service provider Coinmach Services and automobile tire inflation business AIR-serv for a combined $1.4 billion and CITIC Capital Partners led a consortium to acquire software company AsiaInfo-Linkage for $12 per share, valuing the company at $890 million. Also this month, Toronto-based Onex Corporation agreed its first private equity investment of 2013, acquiring tradeshow operator Nielsen Expositions from parent company Nielsen Holdings for $950 million.

In March, Apax cut 10 percent of its staff, bringing the total down to 99 from 110 employees. It has also closed its two Southern European operations and reduced its office space in London. 

The measures have largely been understood to be a response to the challenging fundraising environment for the firm’s Fund VIII. Apax’s previous vehicle, Apax Europe VII, reached a final close in 2007 on €11.2 billion.