Ever since Michelle Obama wore J.Crew on The Tonight Show with Jay Leno, the company’s sales have skyrocketed. Under the leadership of my personal style hero Jenna Lyons (who is currently at the center of a ridiculous controversy over painting her son’s toenails…side note: I heart Jon Stewart), J.Crew sales went up 14%, even during the economic downturn. I can neither confirm nor deny reports that my personal purchases from J.Crew accounted for 13.9% of that increase.
So what did Micky Drexler, CEO of J.Crew, decide to do with these booming sales? Sell, of course! Only, some shareholders accused him of selling at below market value (a mere $3 billion). AND he sold it to J.Crew’s own former parent company. AND he waited 7 weeks to tell the Board of Directors about the deal. AND he said he would not work for anyone besides the buyers with whom he negotiated the deal (TPG Capital and Leonard Green & Partners). Whoops.
Not surprisingly, lawsuits ensued.
Shortly after the announcement of the J.Crew sale to TPG Capital and Leonard Green & Partners, shareholders filed a lawsuit against J.Crew, its Board of Directors, and TPG for breaching their fiduciary duties. The parties eventually settled for $10 million, netting each shareholder 15 cents per share, and each lawyer about $500 per hour (who exactly “won” this lawsuit again?). But the fight is far from over, as the plaintiffs’ lawyers now accuse J.Crew of violating the settlement agreement. And, even though corporate governance advisory firm Institutional Shareholder Services advised J.Crew’s shareholders to vote against the sale, the shareholders nevertheless approved the $3 billion buyout last month.
Although Mickey Drexler has publicly said he would conduct the sale the exact same way (I’m sure), the whole situation is basically a lesson on what not to do in a management-led buyout. Continue reading the full story . . . »