Parent of Lane Bryant, Justice to buy owner of Ann Taylor for $2B

One of the nation's largest women's apparel companies has added two major brands to its lineup.

Ascena Retail Group Inc., the parent of Lane Bryant and Dressbarn, announced Monday that it will acquire the company that owns Ann Taylor and Loft in a deal valued at about $2 billion.

Combined, the companies will have 4,900 stores worldwide and expect to generate $7.3 billion in sales.

“The transaction will make us part of a larger organization with a diversified portfolio of brands focused on the women's apparel market, a strong operating platform and a powerful financial base,” said Kay Krill, the chief executive officer of Ann Inc., the company that owns Ann Taylor and Loft.

There had been chatter on Wall Street for months that Ann was considering a sale. In August, activist investor Engine Capital and hedge fund Red Alder urged Ann to pursue a buyout. The company's profit shrunk in 2014, and sales at its stores open more than a year were down 1.9 percent. Ann Taylor and Loft have struggled amid a deeply promotional retailing environment in which customers have come to expect a constant drumbeat of “40 percent off your purchase” offers.

Ann Taylor has 361 stores nationwide, while its sister brand, Loft, has 664 locations. Ann's fleet of stores includes Ann Taylor Factory, its destination for deal hunters, and a new active and casual-wear concept, Lou & Grey, which has just five locations but is thought to have strong growth potential. Those chains will join Ascena's portfolio of mall staples, such as plus-size retailers Lane Bryant and Catherines, as well as Dressbarn, Maurices and children's clothing store Justice.

In their announcement, the retailers stressed that their organizations were “highly complementary” because they are both focused on women's apparel, and yet Ann Taylor and Loft target a slightly different kind of customer than the Ascena-owned chains. Both companies have similar real estate portfolios.

Ann's stock soared about 20 percent. Ascena's stock closed down about 1 percent.

Liz Dunn, chief executive of retail consultancy Talmage Advisors, said Ann was “ripe to be bought for several reasons related to their corporate structure.” Ann's Manhattan headquarters have an enormously expensive lease, Dunn said, and the company pays its corporate employees higher-than-average salaries.

On a conference call with investors, Ascena chief executive David Jaffe said the companies expect to see savings on back-office functions and supply chain costs once they merge.

The transaction was unanimously approved by both companies' boards of directors and is expected to close this year.