Updated: Since this article was initially published, WWD has since reported that J.Crew itself is threatening to countersue the shareholders, and insists it will stand by the settlement that's now under dispute.
The retailer, in a letter Tuesday to Delaware Chancery Court Vice Chancellor Leo Strine Jr., said it had fulfilled its side of the bargain. “If plaintiffs continue to refuse to negotiate in good faith over the specific wording of a release, defendants will assert counterclaims and third-party claims for breach of contract against plaintiffs and the class, among others,”
After CEO Mickey Drexler engineered the sale of J.Crew to private equity firm TPG for a whopping $3 billion, some shareholders sued the company, claiming the deal actually undervalued the brand. They later settled, but the latest development in the surprisingly rocky takeover of J. Crew for a proposed has said shareholders backing out of the settlement entirely, WWD reports.
The shareholders accuse Drexler and J.Crew of failing to properly honor an agreed portion of the initial settlement, which extended the mandatory "go-shop" period in which J.Crew could accept rival bids. According the New York Times' DealBook, however, that initial accord started to fall apart soon after:
But lawyers for the shareholders were irate that J. Crew had already scheduled a March 1 shareholder meeting to vote on the TPG deal, arguing that the move could stifle the hunt for other bidders. The record date by which shareholders must have owned J. Crew shares to be eligible for the vote was set at Jan. 21.
According to the letter, J. Crew also disclosed the results of the go-shop period thus far — no alternative bidders — giving TPG important information. People involved in the leveraged buyout have said previously that they do not expect rival bids to emerge.
There were minor rumblings about Sears and Urban Outfitters as possible bidders during the "go-shop" period, though of course, no firm bids came forth before the close of the deal. While $3 billion may seem like a serious chunk of change for most, it appears those holding the J.Crew shares think quite differently.