Shares of Lululemon (LULU) are expected to be active when trading resumes on Monday following a Wall Street Journal report that said advisers working for founder Dennis “Chip” Wilson have been talking to private-equity firms including Leonard Green & Partners to judge their interest in taking the apparel company private.
While no deal is in the works, and industry analysts have suggested that a buyout would face significant hurdles given the fact that investors would demand a premium over the company’s current $7.47 billion market cap, the moves do show that Wilson, who relinquished his CEO position in 2005 and stepped down as chairman in May, is actively exploring buyout options as he seeks to exert more influence over how Lululemon Athletica Inc. is run.
At the company’s annual general meeting in June, Wilson, who founded the high-end yoga apparel maker in 1998, lashed out at the retailer’s board, saying he was unhappy with the strategic direction that the management was giving to the company, and stressed the fact that Lululemon’s new chairman and another director were too focused on short-term growth. Wilson said he wants the apparel maker to return to its roots by making product development a higher priority.
The Journal had reported on June 22 that Wilson was working with Goldman Sachs (GS) on plans that may include shaking up the board, increasing his ownership in the company, where he currently has a 28% stake or partner with private equity firms on a buyout.
“We have seen a lot of premature speculation about transactions that Chip Wilson may or may not be considering. Chip will decide if and when he wants to do a transaction of any sort,” a spokesman on behalf of founder Chip Wilson said in an email reply to Reuters.
Lululemon shares closed at $42.60 on Friday. LULU, which currently trades at a multiple of 21.20X FY 2016’s estimated earnings, has been steadily declining over the past year. Ticker is down about 30% YTD, and more than 40% from its Oct 4, 2013 52-wk high of $77.75.