LULU Founder Sells Half His Stake, Halts Proxy Fight to Gain Board Seats

 

As part of the deal, Wilson will sell half his 27 percent stake in the company, or 20.1 million shares, for $845 million to former financial backer Advent International. The private equity firm worked closely with Wilson and five of LULU’s 10 existing directors from 2005 to 2009, when Advent sold its stake in the company. In exchange for Wilson and Advent agreeing not to pursue a proxy fight until after the company’s annual shareholder meeting in 2016, LULU will give Advent two seats on its board, which will expand from 10 to 12. The agreement, which is fully supported by LULU’s board, calls for Advent, Wilson and the board to hire an independent expert within 90 days of the transaction closing to evaluate the board’s committees, policies and procedures and recommend ways to improve corporate governance. The sale is expected to close within 60 to 90 days pending anti-trust review.

 

Advent Managing Partner David M. Mussafer will be appointed co-chairman of the Lululemon board, serving alongside Chairman Michael Casey, who Wilson has sought to oust since June. Mussafer will serve on the boards nominating and corporate governance committee. Advent Managing Director Steven J. Collins will also join the board and serve on the compensation committee. Mussafer served as a director on Lululemon’s board from 2005 to 2010, while Collins served as a director from 2005 to 2009.

 

The value of Wilson’s 40.2 million shares of LULU stock have declined nearly 36 percent, or $1.74 billion, since June, 2013, in the wake of a major recall of LULU’s yoga pants that exposed flaws in the company’s quality control and led to the resignation of its top designer and CEO. In June, Wilson announced he had voted against the re-election of Casey and director RoAnn Costin to LULU’s board because their focus on short-term results was hurting the brand. He described Advent as a strong partner “that knows Lululemon and our culture and will be an incredibly helpful addition to the board as we build an even stronger company.”

 

Casey said last week that the LULU board “is pleased that Chip and Advent are partnering in this transaction. We welcome the opportunity to work with David and Steven, who have significant specialty retail experience and are deeply familiar with Lululemon’s unique culture.”

 

Advent focuses on growth and traditional buyout and strategic repositioning transactions. It has invested in more than 290 buyout transactions in 39 countries since its founding and currently manages $32 billion in assets.