And, exhale… Lululemon, founder reach truce – for now
Lululemon Athletica can relax its warrior pose for now.
The yogawear retailer has reached a truce with its founder, chairman and top shareholder Chip Wilson, who agreed to delay any proxy war against the company’s board until 2016 and to refrain from waging or supporting a hostile takeover of the business during that period.
Under terms of the agreement, announced on Thursday, Wilson will sell half of his 27.7% stake (40.2 million shares) to private equity firm Advent International for $845 million. Advent, which had invested in Lululemon early on, but later sold its stake, will add two of its senior managers, David Mussafer and Steve Collins, to Lululemon’s board. Mussafer will serve as co-chairman with current chairman Michael Casey. Lululemon also agreed to a review of its corporate governance practices. (Like Wilson, Advent is barred from waging a proxy war or hostile M&A activity.)
The deal comes just a few weeks after Wilson slammed the Lululemon board, accusing it of being “heavily weighted towards short-term results at the expense of product, culture and brand and longer-term corporate goals.” Hours before the annual shareholder meeting in June, he said he had voted his shares against the re-election of Casey, and fellow board member RoAnn Costin, president of Boston-based private-equity firm Wilderness Point Investments.
The truce avoids would could have been an ugly, distracting conflict at a time Lululemon, a maker of yoga clothing, is struggling to regain its footing from a debacle last year when it was forced to recall some of its popular pants after customers complained about the material being so thin that it was see-through. That issue ultimately led former CEO Christine Day to step down. In June, the Canadian retailer lowered its sales and profit forecasts. Lululemon shares (LULU) rose 6.2% in afterhours trading on Thursday on news that more zen was coming the company’s way.