The buyout shop taking private Restoration Hardware has gotten a nearly 33 percent discount off its original price, as the retail sector begins to feel the pain of an economic downturn. The specialty retailer said today that it had agreed to an amended deal with Catterton Partners, who will now pay $179 million (€122 million) in equity for Restoration Hardware, rather than the $267 million agreed in November.
In connection with the deal, Catterton has given the retailer a $25 million subordinated loan for working capital purposes, which is not contingent on closing.
“The amended merger agreement today comes as the company and the home related retail sector face increased pressure,” Restoration Hardware said in a statement. “The subordinated loan provides the company with substantially enhanced near-term liquidity to operate in the current environment. The amended merger agreement provides our shareholders a substantial premium to both the unaffected stock price on 7 November 2007, and our current stock price while providing greater certainty of closure.”
The amended agreement expires on 30 June, and “changes the definition of material adverse effect to increase the likelihood that the transaction will close if the company experiences weakness in its operating results”, the company said.
Restoration Hardware has a 35-day go-shop period, which may result in an offer from Sears Holdings, a retailer owned by Eddie Lampert’s hedge fund. Sears had previously bid higher than Catterton for the company.
“This additional time period for competing proposals will allow Sears or other third parties that may have an interest to make an offer,” Restoration Hardware said, noting there are no guarantees it will result in an alternate transaction.
The Catterton deal is expected to close near the end of the first quarter, and is subject to stockholder and regulatory approval as well as closing conditions.