Lawyers from two Am Law 100 firms are breaking out the black lights and putting on their favorite band T-shirts to advise on the $600 million sale of teenage clothing retailer Hot Topic to Sycamore Partners, the latest in a trio of retail-related transactions by the New York–based private equity firm.
Barbara Borden, head of the M&A practice at Cooley in San Diego, is leading a team from the firm advising City of Industry, California–based Hot Topic on its sale to Sycamore.
Other Cooley lawyers working on the matter include corporate partners Jason Kent and Al Browne, compensation and benefits partner Thomas Welk, credit finance partner Michael Tollini, antitrust partner Howard Morse, tax partner Bill Morrow, securities litigation cochair Koji Fukumura, M&A special counsel Rama Padmanabhan, and associates Peter Adams, Rebecca Jones, Terren O’Connor, and Jon Russo.
Jonathan Block has served as vice president and general counsel of Hot Topic since 2010. The company’s in-house legal chief between 2004 and 2007 was former Cooley partner Christopher Kearns, who is now deputy general counsel at insurance giant ACE Group in New York. (Hot Topic was founded in 1988.)
Winston & Strawn is advising New York–based Sycamore on its purchase of Hot Topic, along with Gary Holihan, a solo practitioner in Chicago. Both Holihan and Winston have handled several major deals in recent years for Sycamore, which was founded in early 2011 by retail industry veterans Stefan Kaluzny and Peter Morrow, former colleagues at San Francisco–based private equity firm Golden Gate Capital.
Sycamore turned to Holihan and Winston for counsel on its $300 million acquisition of a 51 percent stake in Mast Global Fashions from Limited Brands in late 2011, as well as its $391 million purchase of struggling women’s clothing chain Talbots last summer.
Hingham, Massachusetts–based Talbots hired Dewey & LeBoeuf in 2011 to fend off Sycamore, rejecting a $212 million buyout offer from the private equity firm, before eventually agreeing to be sold last year to Sycamore, which is also currently maneuvering to buy Australian surf-wear maker Billabong International for $586.6 million. (Allens, a leading Aussie firm that represented Billabong last year in fending off another bid by private equity firm TPG Capital, is once again advising the apparel and accessories maker.)
Taking the lead advising Sycamore on the Hot Topic transaction are Winston corporate partners James Faley Jr., Cab Morris, and Greg Murray, and tax partner Roger Lucas, all of whom are based in Chicago.
The sale of Hot Topic still requires regulatory and shareholder approval. Becker Drapkin Management, a Dallas-based small cap investment fund cofounded by attorney Matthew Drapkin, is Hot Topic’s largest shareholder. Drapkin serves as lead independent director for Hot Topic and his fund has approved the company’s sale to Sycamore.
Hot Topic, which has turned itself around in recent years, is one of many U.S. retailers that have faced financial hardship in recent years as consumer buying habits change.
Last week an $8.8 billion takeover bid for big box electronics retail giant Best Buy involving a trio of private equity firms—as well as Shearman & Sterling and Simpson Thacher & Bartlett, according to our previous reports—collapsed amid concerns over debt and an announcement by the company that it would cut 400 jobs.
Plano, Texas–based department store giant J.C. Penney also announced this week that it would slash 2,200 jobs, as the company and its lawyers from Skadden, Arps, Slate, Meagher & Flom have sued bondholders represented by Brown Rudnick in order to prevent them from declaring default on $3 billion in debt.
True Religion Apparel, a high-end jeans maker that parted ways with its founder and CEO this week, has hired Greenberg Traurig to negotiate a potential sale of the Vernon, California–based company. Sycamore has been mentioned as a lead bidder for the upscale denim-wear designer.