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Ann Joins PetSmart, Family Dollar as Activists Target Retailers

Ann Taylor is the latest retailer to be targeted by activists seeking a sale of undervalued companies in the space, The Deal's Jamie Mason interviewed Richard Collings, senior writer at The Deal about this trend. On Monday, Aug. 25 hedge funds Engine Capital and Red Alder said they sent a letter to the New York-based retailer’s board expressing disappointment that discussions with the company had not led it to explore a sale. The two activist investors said Ann Taylor was undervalued at 5.5 times Ebitda, and could end up fetching a price that is a 40% premium to where it was trading at prior to the announcement at between $50 to $55 per share. Ann Taylor is the latest retailer to be pressured by hedge funds due to a low valuation multiple. PetSmart has come under fire from Jana Partners, who has been barking for a sale of the business this summer. The purveyor of all things pet caved last week, saying that it would explore strategic alternatives, including a sale. Activist pressure on Family Dollar has actually led to a bidding war, over the discounter with Dollar General trumping a deal Family Dollar inked with Dollar Tree by $4 per share. It is likely we will see more such retailers become the object of activists’ affection over the coming months.