Ascena Retail Group Inc., owner of staid clothing stores Dressbarn and Lane Bryant, is upgrading its image by buying classic women's retailer Ann Inc. for $2.15 billion.
By adding the Ann Taylor and Loft brands to its portfolio, Ascena will become one of North America's largest and most diversified specialty apparel retailers.
Mahwah, N.J.-based Ascena operates about 3,900 stores in the U.S. and Canada, including the plus-size Catherines and preteen Justice chains. Ann Inc. has about 1,090 stores in the U.S., Puerto Rico and Canada.
The combined company would be able to focus "exclusively on serving the needs of women of all ages, sizes and demographics," Chief Executive David Jaffe said Monday.
The deal comes after major Ann Inc. shareholders Engine Capital and its partner Red Alder urged the board last August to sell the venerable women's retailer. Ann Inc. had suffered same-store sales declines in three of its past quarters as up-and-coming fast-casual clothing chains ate up market share.
Some analysts questioned whether the combined company would be any more able to compete against fast-fashion retailers that turn over inventories quickly. Ascena and Ann Inc. already struggle to distinguish themselves from competitors like H&M.
"I wouldn't call it a blockbuster deal by any stretch," said Paula Rosenblum, analyst for Retail Systems Research. "Just because you put a bunch of things together doesn't mean you get synergies."
Kay Krill, chief executive of Ann Inc., said the deal would give Ann Inc. a powerful financial base.
"As a member of the Ascena family, Ann will be poised to further enhance and grow our business," she said.
Ann Inc. stockholders will receive $37.34 in cash and 0.68 of a share of Ascena common stock for a price per share total of $47.
The offer represents a 21.4% premium over the Friday closing price of Ann Inc. shares. After the deal closes, Ann Inc. shareholders will own 16% of Ascena.
The deal is expected to close in the second half of 2015 after approval from Ann Inc. shareholders.
Ann Inc. shares soared $7.69, or 19.8%, to close at $46.40, shares of Ascena fell 14 cents, or 0.9% to close at $15.35.