12/28/05

Linens ‘n Things files proxy, aims for merger completion early next year

Citing improved recent financial trends, Linens ‘n Things says it believes it will meet debt financing criteria. The retailer hopes the deal with Apollo Management will help fend off big-box store competition.

Mary Wagner

In a proxy statement filed with the U.S. Securities and Exchange Commission, multi-channel retailer Linens `n Things Inc., which in November agreed to be acquired by private equity firm Apollo Management L.P., said it hopes to complete the deal by the end of the first quarter or early in the second quarter, citing improved recent financial trends.

The financing agreement stipulates fourth-quarter sales and EBIDTA goals for the year that retailer must meet as a condition of completing the merger. Under the terms, the company’s comparable net sales for the fourth quarter must not drop more than 6% and its EBITDA earnings for the year must not be less than $140 million.

In the proxy statement, Linens n` Things, No. 101 in the Internet Retailer Top 400 Guide to Retail Web Sites, revisited reasons for its Board of Directors` unanimous support of the proposed merger. Among other factors, the Board cites “changes within the company the Board believes would be necessary in order for the company to achieve its long range goals of sustained sales earnings and growth as a stand-alone, independent company.”

The proxy also cited “competitive pressures the company faces from larger retailers with greater resources,” a reference to increasing competition from big-box stores, as well as “disappointing financial results.” In 2004, net income dropped to $60.5 million on sales of $2.66 billion from $74.8 million on sales of $2.34 billion the previous year. For the quarters ended March 5 and June 5 of this year, the company reported net losses of $4.1 million on sales of $257.5 and $5.9 million on sales of $573.3, respectively. For the quarter ended September 5, the company reported net income of $1 million on sales of $289.9 million.

In addition to achieving fourth quarter results that meet financing criteria, completion of the merger is subject to shareholder approval. The company’s 2004 web-based sales are estimated at about $60 million.

Topics:

business, business finance, Clifton, New Jersey, Linens 'n Things

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