The Children’s Place: How To Buy A Company Without M&A Fees

The Children’s Place (NASDAQ: PLCE), a renowned children’s apparel retailer with a market capitalization of $363 million, underwent what has become an unconventional acquisition practice: buying a company outright through open-market stock purchases.

The acquisition, orchestrated by the Al-Rajhi family’s investment firm, Mithaq Capital, swiftly secured a majority stake of 54% in The Children’s Place over three trading sessions, involving an expenditure of at least $80 million.

However, the acquisition triggered a default on The Children’s Place’s credit agreement, prompting urgent discussions with lenders to seek a waiver. In a bid to stabilize its financial position, Gordon Brothers Group extended a $130 million loan offer to The Children’s Place.

Gordon Brothers Group, known for its expertise in liquidating brick-and-mortar retailers, provided a term sheet for the loan, which is currently undergoing due diligence and is subject to certain conditions. Finalization of the loan agreement is anticipated next month.

This acquisition followed the company’s announcement of an operating loss in Q4 2023, resulting in a staggering 58% drop in its shares. Mithaq Capital capitalized on this downturn by purchasing shares at $17.10 apiece or less.

The acquisition by Mithaq Capital triggered a change-of-control provision, prompting the need for refinancing of The Children’s Place’s previous $50 million debt package.

Mithaq Capital has further revealed its intention to nominate 11 individuals to The Children’s Place’s board of directors, signaling potential changes in the company’s governance and strategic direction.

Sheikh Saleh AlRajhi, founder of AlRajhi Bank, is associated with the AlRajhi family, which orchestrated the acquisition through Mithaq Capital.

Despite these challenges, The Children’s Place continues to maintain a significant presence in North America and international markets, offering apparel, accessories, and footwear under proprietary brands such as The Children’s Place, Gymboree, Sugar & Jade, and PJ Place, with over 500 stores and franchise partners worldwide.

Information for this briefing was found via Reuters, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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