By Martinne Geller
NEW YORK, March 29 (Reuters) - Women's apparel retailer Talbots Inc extended its exchange offer by three days in a move Wall Street took as a sign its merger is nearing completion.
Talbots shares jumped 13.2 percent on Monday, while the shares of BPW Acquisition Corp, a special purpose acquisition company Talbots is acquiring, rose 11.7 percent.
In addition, Lazard Capital Markets upgraded Talbots shares to 'buy' from 'hold' and Miller Tabak reinstated coverage of Talbots with a 'buy' rating.
The deal announced in December allows Talbots to reduce its debt by about $330 million and ends its 21-year relationship with Japan-based Aeon Co Ltd.
Talbots said its offer -- to exchange outstanding BPW warrants for Talbots shares or warrants to buy Talbots shares -- was previously scheduled to expire at midnight on March 26.
Yet only 87.5 percent of BPW warrants had been tendered by that time, Talbots said, noting the minimum required to complete deal was 90 percent.
As a result, Talbots said it would extend the exchange offer to 6 p.m. EDT on Monday, unless extended further.
FBR Capital Markets analyst Adrienne Tennant said she believed Talbots could potentially amend the terms of the deal and lower the hurdle to the 87.5 percent level if it is unable to reach the 90 percent threshold.
'This would likely result in a longer delay than anticipated,' Tennant wrote in a research note. 'Nonetheless, we believe the deal will continue to progress toward closure, even if modifications and delays need to occur.'
Tennant also said the jump in Talbots shares boded well for the deal's closure.
'We believe any holdouts on the warrant exchange offer, who also own BPW common stock, have tremendous incentive to tender any remaining warrants,' Tennant said. 'Based on today's trading action in both stocks, we have increasing confidence that the 90 percent hurdle should be met by tonight's deadline and that a deal should be consummated in short order.'
Lazard Capital analyst Todd Slater said Talbots could also 'sweeten the pot for warrant holders by either decreasing the exchange ratio or lowering the exercise price.'
Slater added he did not foresee any 'meaningful dilution' for Talbots shareholders from any delays.
UBS analyst Roxanne Meyer said she was confident the merger would close and that improving liquidity was the key catalyst to getting investors off the sidelines.
'We continue to believe that Talbots is one of the best margin recovery stories in retail and see fundamentals improving from better merchandise, marketing, sourcing and a return of the boomer shopper,' Meyer wrote in a note.
The exchange offer was filed with the Securities and Exchange Commission on March 17.
Talbots shares closed up $1.51 at $12.99 on the New York Stock Exchange, while BPW shares closed up $1.30 at $12.45 on the the NYSE Amex.
(Reporting by Martinne Geller; editing by Lisa Von Ahn and Maureen Bavdek)
((Reuters Messaging: martinne.geller.reuters.com@reuters.net; +1 646 223 6023)) Keywords: TALBOTS/ (http://blogs.reuters.com/shop-talk/ for Shop Talk -- Reuters' retail and consumer blog) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, March 29 (Reuters) - Women's apparel retailer Talbots Inc extended its exchange offer by three days in a move Wall Street took as a sign its merger is nearing completion.
Talbots shares jumped 13.2 percent on Monday, while the shares of BPW Acquisition Corp, a special purpose acquisition company Talbots is acquiring, rose 11.7 percent.
In addition, Lazard Capital Markets upgraded Talbots shares to 'buy' from 'hold' and Miller Tabak reinstated coverage of Talbots with a 'buy' rating.
The deal announced in December allows Talbots to reduce its debt by about $330 million and ends its 21-year relationship with Japan-based Aeon Co Ltd.
Talbots said its offer -- to exchange outstanding BPW warrants for Talbots shares or warrants to buy Talbots shares -- was previously scheduled to expire at midnight on March 26.
Yet only 87.5 percent of BPW warrants had been tendered by that time, Talbots said, noting the minimum required to complete deal was 90 percent.
As a result, Talbots said it would extend the exchange offer to 6 p.m. EDT on Monday, unless extended further.
FBR Capital Markets analyst Adrienne Tennant said she believed Talbots could potentially amend the terms of the deal and lower the hurdle to the 87.5 percent level if it is unable to reach the 90 percent threshold.
'This would likely result in a longer delay than anticipated,' Tennant wrote in a research note. 'Nonetheless, we believe the deal will continue to progress toward closure, even if modifications and delays need to occur.'
Tennant also said the jump in Talbots shares boded well for the deal's closure.
'We believe any holdouts on the warrant exchange offer, who also own BPW common stock, have tremendous incentive to tender any remaining warrants,' Tennant said. 'Based on today's trading action in both stocks, we have increasing confidence that the 90 percent hurdle should be met by tonight's deadline and that a deal should be consummated in short order.'
Lazard Capital analyst Todd Slater said Talbots could also 'sweeten the pot for warrant holders by either decreasing the exchange ratio or lowering the exercise price.'
Slater added he did not foresee any 'meaningful dilution' for Talbots shareholders from any delays.
UBS analyst Roxanne Meyer said she was confident the merger would close and that improving liquidity was the key catalyst to getting investors off the sidelines.
'We continue to believe that Talbots is one of the best margin recovery stories in retail and see fundamentals improving from better merchandise, marketing, sourcing and a return of the boomer shopper,' Meyer wrote in a note.
The exchange offer was filed with the Securities and Exchange Commission on March 17.
Talbots shares closed up $1.51 at $12.99 on the New York Stock Exchange, while BPW shares closed up $1.30 at $12.45 on the the NYSE Amex.
(Reporting by Martinne Geller; editing by Lisa Von Ahn and Maureen Bavdek)
((Reuters Messaging: martinne.geller.reuters.com@reuters.net; +1 646 223 6023)) Keywords: TALBOTS/ (http://blogs.reuters.com/shop-talk/ for Shop Talk -- Reuters' retail and consumer blog) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.