Dress Barn To Acquire Tween Brands

Dress Barn, Inc. will acquire Tween Brands Inc. in a stock-for-stock transaction. Under the terms of the agreement, each share of Tween Brands, Inc. common stock will be exchanged for 0.47 shares of Dress Barn, Inc. common stock.

Based on Dress Barn Inc.’s stock price of $13.24 as of June 24, 2009, this consideration would be equivalent to $6.22 per Tween Brands, Inc. share, representing an aggregate equity value of approximately $157 million. In connection with the transaction, Tween Brands, Inc.’s outstanding bank debt will be repaid.

The transaction is expected to close in the fourth quarter of calendar year 2009 and is subject to Tween Brands, Inc. stockholder approval and other customary closing conditions.

Upon completion of the acquisition, Tween Brands, Inc., which operates the Justice retail chain, will operate as a separate subsidiary of Dress Barn, Inc. Mike Rayden, currently chairman and CEO of Tween Brands, Inc., will report directly to Dress Barn CEO David Jaffe.

The Hand-Wringer’s Take: As Tween Brands becomes part of Dress Barn, what will become of its aggressive mailing strategy? According to Tween Brands’ most recent annual financial filings with the Securities and Exchange Commission, its “catazines” are the cornerstone of its marketing program. In fact, the company has relied strongly on direct mail. Tween Brands’ most recent annual SEC filings reveal that catazine and other advertising costs amounted to $42 million, $36.4 million and $23.9 million for fiscal years 2008, 2007 and 2006, respectively. As for new parent firm Dress Barn, while it does use direct mail, it also emphasizes print advertising. It also doesn’t seem to have the same focus on loyalty marketing as Tween Brands. For Dress Barn, marketing and advertising expenses were $25.1 million for fiscal 2008, $21.3 million for fiscal 2007, and $17.3 million for fiscal 2006.