Lululemon Athletica founder Chip Wilson agreed to sell half his stake in the yogawear retailer to private equity group Advent International for $US845 million ($913 million) and forgo pursuing a buyout for at least a year, ending a clash with the board.
Wilson, who had voiced his dissatisfaction with the company’s direction after stepping down as chairman, also agreed with Advent to name David Mussafer and Steve Collins to the board, according to a statement today. The stake sold represents about 13.9 percent of the shares outstanding.
Wilson founded Lululemon in 1998, opening the first store in a trendy, inner-city Vancouver neighbourhood, sharing space with a yoga studio. It now operates about 200 stores in Canada and the US, Australia and New Zealand. There are plans into Europe and Asia over the next three years.
The deal caps months of disagreements between Lululemon and its outspoken founder, who said in June he voted unsuccessfully against the re-election of Michael Casey, his successor as chairman. The agreement also lets management, which has spent much of the past year recovering from a widespread pants recall, turn its full focus to reigniting sales growth and expanding overseas.
“By doing this, he has diluted his voice and influence on the company,” Betty Chen, an analyst at Mizuho Securities in San Francisco, said of Wilson in an interview. “Certainly, the company would prefer to start to minimize some of the negative PR from Chip.”
Chen has a “hold” rating on the shares, which jumped 5.3 percent to $US41.10 in late trading in New York. Vancouver-based Lululemon had slid 34 percent this year.
Advent, a Boston-based private-equity firm, was an early backer of Lululemon and helped it expand from a regionally focused retailer to a global brand.
In 2005, Wilson sold a 48 percent stake in his company to Advent and Highland Capital Partners for $93 million. Advent, which exited its original investment in June 2009, said in today’s statement that it worked closely with Wilson and five of the current directors, including Casey, during its expansion.
Wilson, a 58-year-old billionaire and meditation activist, founded Lululemon in 1998 after taking a yoga class and built a devoted following for the brand in the U.S. and Canada with unconventional methods, such as local brand “ambassadors” and free yoga sessions.
The company hit a rough patch last year when it recalled its black Luon yoga pants because they became too transparent when the wearer bent over. About two weeks after the recall, Lululemon said Chief Product Officer Sheree Waterson was stepping down. Two months later, Chief Executive Officer Christine Day announced plans to retire.
In December, the company said TOMS shoes executive Laurent Potdevin would take over as chief executive. That same month, Wilson said he would resign as chairman prior to the June annual meeting. Wilson’s involvement in the company may have scared off some potential candidates to replace Day as CEO, analysts said in November.
Potdevin has been shifting company’s international strategy away from a pattern of first opening showrooms — smaller locations with limited selections and shorter hours — before finding the right staff and locations for full, permanent stores. The company will now run those processes at the same time, and it’s also hired a general manager for Asia.
In June, Wilson said that the company had become too concerned with short-term results and that the company was losing sight of its product, culture, brand and longer-term goals. The clash sparked speculation that Wilson would attempt to lead a buyout of the chain.
Wilson decided to sell part of his stake to Advent in early July and sought Lululemon’s support for the deal later in the month, according to a person familiar with the matter.
Mussafer will become co-chairman with Casey, the company said today. The two new directors will join the board at the closing of the transaction, expanding it to 12 members from 10.
From: AFR