DOW JONES NEWSWIRESDSW Inc. (DSW) has agreed to buy out its majority shareholder, Retail Ventures Inc. (RVI) in an all-stock deal valued at $772.8 million.
Retail Ventures shares jumped 10% to $17.58 in recent after-hours trading, compared with the $15.76 offer price. DSW was up 13% at $40.90.
The acquisition would turn shareholders of Retail Ventures, whose only operating business is its 62% stake in DSW, into direct holders of the shoe retailer. It's seen eliminating complexity associated with the current structure. Under the transaction, DSW would pay Retail Ventures holders 0.435 share for each of their shares.
As part of the transaction, DSW expects to effectively retire 27.4 million Class B shares owned by Retail Ventures. It expects the purchase to reduce its diluted share count without it having to buy back stock, a move undertaken by a host of companies lately as corporate cash piles have grown and the perceived need to hoard cash has receded. DSW also expects tax benefits along with the deal.
DSW also said its fiscal fourth-quarter revenue increased 16% to $468.5 million as same-store sales grew 15%. Analysts polled by Thomson Reuters projected $445 million.
The shoe retailer has reported sharply improved results of late as consumers have widely returned to paying fuller prices and been lured in by more brand-name items. It reined in new-store openings and cut jobs as part of cost-control efforts last year.
-By Matt Jarzemsky, Dow Jones Newswires
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