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Bain Capital, Golden Gate vying for Ann Taylor parent -sources

By Olivia Oran

March 4 (Reuters) - Private equity firms Bain Capital LLC and Golden Gate Capital Corp are competing to acquire Ann Inc , the struggling U.S. women's retailer and owner of the Ann Taylor brand, according to people familiar with the matter.

The negotiations with the buyout firms make Ann, which has a market capitalization of $1.6 billion, the latest retailer to seek a leveraged buyout in response to declining earnings. A deal is highly uncertain, however, because banks are reluctant to provide as much debt as buyout firms want amid economic concerns over these retailers, as well as regulatory constraints.

The exact status of the talks between the private equity firms and Ann could not be learned. It is possible that other buyout firms could emerge as buyers for the company, the people said this week.

The sources requested anonymity because the talks are confidential. Ann, Golden Gate and Bain declined to comment.

Like other women's specialty retailers, Ann has been hit hard in recent quarters by increased competition, heavy in-store promotions and a pullback in consumer spending.

Taking retailers private has become increasingly difficult within the last year, as many of these companies cope with low traffic and declining sales. Guidance on leveraged lending from U.S. regulators has made financing even more difficult.

Private equity firm Sycamore Partners abandoned an attempt to acquire women's retailer Express Inc earlier this year because it could not get deal financing on acceptable terms.

Sycamore is also struggling to finance a buyout of Chicos FAS Inc for similar reasons, Reuters previously reported.

Ann is also facing pressure from two shareholders, hedge funds Engine Capital LP and Red Alder LLC, to consider selling itself to a private equity firm or a large international retailer.

Best known for its women's suits and officewear, Ann hired investment bank JPMorgan Chase & Co last summer to explore strategic alternatives, Reuters has previously reported.

Last year, Golden Gate took a 9.5 percent stake in Ann, saying the stock was undervalued. Ann later said it had entered into a confidentiality agreement with Golden Gate.

Ann operates 1,050 Ann Taylor, Ann Taylor Factory, Loft and Loft Outlet stores in 47 states; Washington D.C.; Puerto Rico and Canada.

In the three months to Nov. 1, Ann reported profit of $30 million, down from $41 million a year earlier. Excluding one-time items, Ann reported profit of $33 million.

(Additional reporting by Greg Roumeliotis in New York; Editing by Lisa Von Ahn)