J Crew takeover

sajohnson05 · Nov 23, 2010

http://news.yahoo.com/s/nm/20101123/bs_nm/us_jcrew

Looks like J Crew is being taking private for $3 billion. Is this good or bad for the direction of J Crew?

mack11211 · Nov 23, 2010

CEO Drexler is part of the deal. He made J Crew what it is in recent years. So long as he's' in charge, they should do the same things in the same way.

patrickBOOTH · Nov 23, 2010

Originally Posted by mack11211

CEO Drexler is part of the deal. He made J Crew what it is in recent years. So long as he's' in charge, they should do the same things in the same way.

It's good for me because I am a shareholder. They made me some money in the last few years.

I am pro private companies. Issuing public equity is so expensive I can't see why many companies do it.

Gus · Nov 23, 2010

It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

Unfortunately, private equity firms will often do the latter.

Icarus · Nov 23, 2010

Originally Posted by patrickBOOTH

It's good for me because I am a shareholder. They made me some money in the last few years.

I am pro private companies. Issuing public equity is so expensive I can't see why many companies do it.

Access to capital markets and credibility. Private Co.s can have both, but being a public company provides liquidity and growth prospects to "smaller" companies.

Icarus · Nov 23, 2010

Originally Posted by pocketsquareguy

It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

Unfortunately, private equity firms will often do the latter.

Yes, it's all about an exit. TPG was the founders' exit, ECM/IPO was TPG's exit, etc.

It's obvious J. Crew will be public again.

gdl203 · Nov 23, 2010

I believe that several of SF darling brands are owned by PE shops. Filson comes to mind.

gdl203 · Nov 23, 2010

Originally Posted by patrickBOOTH

Issuing public equity is so expensive I can't see why many companies do it.
What do you mean by this? Do you mean public company costs (additional reporting, legal costs, etc...)?

Icarus · Nov 23, 2010

Originally Posted by gdl203

What do you mean by this? Do you mean public company costs (additional reporting, legal costs, etc...)?

Most naysayers complain about initial compliance and ongoing costs. Sarbanes-Oxley compliance is not that much more expensive but it has certainly generated a lot of backlash. I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.

gdl203 · Nov 23, 2010

Originally Posted by Icarus

Most naysayers complain about initial compliance and ongoing costs. Sarbanes-Oxley compliance is not that much more expensive but it has certainly generated a lot of backlash. I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.

Agree - costs could be heavy for micro-caps but don't move the needle for a large company like J Crew.

Maybe he did mean the fees...

That said, on a more fundamental basis, public investors require lower returns than private equity ones. So on a pure CAPM basis, the cost of equity of a public company is lower than that of a PE owned one.

furo · Nov 23, 2010

I frequent J Crew often enough, but the only thing I've ever bought was their messenger bag. The rest of their product is just meh for the pricing.

Nicola · Nov 23, 2010

Originally Posted by Icarus

I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.

If you mean miners they've always listed TSE or before that VSE. To a lesser extent London.

It's nothing to do with costs. Cdns always have a certain love of miners. VSE with it's small caps ranged from lottery players to crooks

JayJay · Nov 23, 2010

Originally Posted by furo

I frequent J Crew often enough, but the only thing I've ever bought was their messenger bag. The rest of their product is just meh for the pricing.
I'm not as impressed with them as I used to be. Lately I just quickly walk through their stores, and leave underwhelmed and empty-handed.

madmadigan · Nov 23, 2010

Originally Posted by pocketsquareguy

It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

Unfortunately, private equity firms will often do the latter.

Exactly

joneog · Nov 23, 2010

That said, on a more fundamental basis, public investors require lower returns than private equity ones. So on a pure CAPM basis, the cost of equity of a public company is lower than that of a PE owned one.

Or put another way: it's easier to sell the public (or their agents) over-priced garbage. PE guys a bit more discerning.

J Crew takeover

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