Exiting Talbots (TLB) on Rumors of Potential Bids

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I reported on Talbots (TLB) on December 9th as an interesting special situation. Sycamore Partners had put in an unsolicited offer to buy the company for $3.00 a share while the stock remained in the $2.60-2.70 range. Talbots stock spiked today from an open at $2.69 to the $3.10-3.20 range on a CNBC report that Golden Gate Capital and TPG were mulling bids for the company. This CNBC report was quoted in various news outlets (here for example) as saying Golden Gate and TPG had actually submitted winning bids for the company (not sure how they could both win- maybe a joint bid?). But the report itself just says that they are weighing bids and that the bidding process will unfold over the next several weeks.  The market likes at least a rumor that there is a bidding process going on. To date the company has only issued a vague “ongoing exploration of strategic alternatives” response to the Sycamore Partners buyout offer.

I think if TLB is intent on selling they will get  $3.50-4.00 a share, but I sold my TLB shares today. Given the unsubstantiated nature of these rumors, the sorry state of TLB’s business, and the TLB board’s less than perfect track record of preserving shareholder value the risk/reward above $3 a share is no longer compelling.

Disclosure: No position in TLB

3 Responses to Exiting Talbots (TLB) on Rumors of Potential Bids
  1. krazeenyc
    May 31, 2012 | 1:37 pm

    What do you think of buying TLB now for the > 15% arbitrage opportunity.

    • Elie Rosenberg
      May 31, 2012 | 4:15 pm

      Yeah it is interesting. Not sure why the spread is so wide. At this point it would seem both sides are highly motivated to close the deal.

  2. krazeenyc
    May 31, 2012 | 9:09 pm

    I’ve done very well with these arbs in the past — but am constantly worried that the next one will be the one to smack me in the face.

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