Engine Capital, Red Alder Urge Ann To Explore Strategic Options, Including Sale

(RTTNews) - Engine Capital LP and Red Alder LLC, Monday, urged the board of directors of women's apparel retailer Ann, Inc. (ANN) to retain immediately a nationally-recognized investment bank and establish a special committee of independent directors to explore strategic alternatives to maximize shareholder value, including a sale of the company.

Following discussions with Ann over the last couple of weeks, the companies have found that Ann has not taken any prompt action to announce commencement of process to explore strategic alternatives to maximize shareholder. Ann, Inc., is the parent company of Ann Taylor and LOFT, two of the leading women's specialty retail fashion brands in North America.

Engine Capital together with its affiliates, and Red Alder, collectively own in excess of 1 percent of the outstanding shares of Ann. Engine Capital and Red Alder believe that Ann could be worth between $50 and $55 per share to a third-party acquirer, implying a premium of around 40 percent to the current stock price, assuming the midpoint of its valuation range.

In a letter to Ann's board, activist investor stated that the company is deeply undervalued and that opportunities exist to close the significant valuation gap and unlock shareholder value. They said that there is a significant gap between the trading value of Ann stock and the intrinsic value of its business.

They also believe the vast majority of Ann's shareholders would support this course of action.

Engine Capital and Red Alder requested that the board of Ann establish a special committee, consisting of only independent members of the board with its own legal and financial advisors, to conduct the strategic alternatives review.

Separately, Ann issued a statement regarding the press release by Engine Capital and Red Alder, and welcomed open communications with its shareholders and said it values constructive input toward the goal of enhancing shareholder value.

On last Friday, Ann reported an 8 percent decline in profit for the second quarter from last year, as higher sales were more than offset by soft traffic and lower margins due to higher-than-anticipated promotional activity. The firm forecast revenue for the third quarter below Street estimates and also lowered its revenue outlook for fiscal 2014.

ANN is currently trading at $38.81, up 3.44 percent.