Belk agrees to be bought by Sycamore for about $2.7 billion

Belk, the 127-year-old department-store chain concentrated in the southern United States, agreed to be acquired by Sycamore Partners for about $2.7 billion in cash.

Belk investors will receive $68 per share, with the transaction valuing the retailer at about $3 billion on an enterprise basis, the companies said in a statement on Monday. Under the terms of the deal, Tim Belk will stay chief executive officer of the department-store chain and it will remain based in Charlotte, North Carolina.

Sycamore, a private-equity firm in New York, is known for investing in retail companies and trying to reinvigorate them. The firm, started in 2011 by two executives from Golden Gate Capital, purchased Hot Topic for about $533.5 million in 2013 and was in talks to buy Billabong International before discussions broke off. The firm, which oversees more than $3.5 billion in capital, also purchased Talbots in 2012.

The Belk acquisition is a more ambitious deal for Sycamore and a different kind of business than it has purchased in the past. Unlike many apparel brands, Belk has steadily increased sales over the past five years, persevering in a sluggish industry. Revenue grew 1.8 percent to $4.11 billion in the most recent fiscal year, which ended Jan. 31.

“Belk is exactly the kind of investment we look for: an outstanding brand with a proven success formula and the potential for further growth,” Stefan Kaluzny, managing director of Sycamore Partners, said in the statement.

Belk has almost 300 locations in 16 Southern states, including stores at Alliance Town Center in north Fort Worth and the Dallas Galleria. A Belk store is also under construction at the Glade Parks shopping center in Euless.

The department-store industry has stumbled in recent years, hurt by slowing foot traffic at shopping malls and customers seeking bargains. Macy’s, the largest department-store company, reported disappointing earnings earlier this month. It’s attempting to cope with the slump by experimenting with off-price locations and adding new brands.

Sears Holdings faces even greater challenges. That company, which runs the Sears and Kmart chains, has posted 21 consecutive quarterly sales declines. To bolster its finances, Sears generated about $2.7 billion through a plan that sells stores to a real estate investment trust and leases them back.

Sycamore’s Belk acquisition is slated to close in the fourth quarter of this year. The company is family owned, and a majority of shareholders are in favor of the transaction, according to the statement.

“We are delighted to have found a financial partner that sees what we see in Belk,” Tim Belk, part of the company’s third generation of family leadership, said in the statement. “We plan to grow Belk by executing our current strategic initiatives and undertaking new growth initiatives together with Sycamore.”

This story was originally published August 24, 2015 at 10:15 AM with the headline "Belk agrees to be bought by Sycamore for about $2.7 billion."