Belk agrees to sell the company for $3 billion to Sycamore Partners

Belk executives say they don't expect customers and employees to see big changes from the deal announced Monday to sell the Charlotte-based department store chain to a New York private equity firm for $3 billion.

No store closings or layoffs are planned at the nation’s largest family-controlled department store, and the buyer, Sycamore Partners, supports the company’s brand and merchandise offerings, CEO Tim Belk said in an interview. The headquarters will remain in Charlotte.

“The Belk that (customers) love is not going to change,” said Belk, who will remain as CEO. “We’re going to continue to build on the foundation we’ve put in place.”

A deal for Belk had been expected since April when the company said it was exploring a possible sale, and Sycamore had emerged as the possible buyer last month. The sale would end local control of the 127-year-old retailer that began in Monroe and grew to become one of Charlotte’s iconic companies.

Analysts said the sale is an attractive deal for the Belk family, which controls more than 70 percent of the company’s stock. But Sycamore is making its first foray into the department store business at a challenging time for the industry. Belk is under pressure to compete with brick-and-mortar stores as well as online retailers.

“This is perfect timing for the Belk shareholders, and terrible for the buyers,” said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates Inc. “The department store sector is terrible. I cannot explain why the buyers wanted it.”

Macy’s and Kohl’s, for example, both recently reported a slump in second quarter earnings as shoppers scaled back on traditional items like clothing and gravitated more to services and dining out.

“They say they won’t have firings or close stores, but what will they do when the results are bad?” Davidowitz added.

Brian Hamilton, chairman of Sageworks, however, called the acquisition a “pretty good deal” for everyone involved.

“Sycamore is getting a solid company, with a proven track record of profitability, positive cash flow from operations, and consistent revenue. Belk is getting what appears to be a fair offer, valuing their company at 20 times their trailing earnings,” said Hamilton, whose firm provides research on private companies.

The deal, which includes the company’s debt, is subject to regulatory approval and is expected to close in the fourth quarter this year, according to a securities filing.

While Tim Belk will remain CEO, his brother, Johnny Belk, said in an interview that he will remain the company’s chief operating officer through the end of January, but will then leave to pursue “other interests.” It is unclear what he will do and who will assume the COO role.

Tim Belk said the company plans to grow by “executing our current strategic initiatives and undertaking new growth initiatives together with Sycamore,” calling the transaction “an across-the-board win for our stakeholders.”

Sycamore has a portfolio consisting mostly of investments in specialty apparel companies including Aéropostale, Coldwater Creek, Hot Topic, Jones New York, Nine West Holdings and Talbots.

The firm, which has more than $3.5 billion in capital under management, says its strategy is to partner with management teams to improve profits and the value of their businesses.

CEO Belk said Sycamore Partners hasn’t laid out a timetable on what they want to do with the company next, such as holding an initial public offering or selling it to another buyer, though the typical time frame is five to seven years.

Staff Writer Ely Portillo contributed

This story was originally published August 25, 2015 at 12:34 AM with the headline "Belk agrees to sell the company for $3 billion to Sycamore Partners."