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Talbots moves to negate hedge fund suit

Date: Tuesday, March 30, 2010
Author: Boston Business Journal

Shrugging off a recently filed lawsuit that threatens to delay its pending merger, The Talbots Inc. has extended the deadline for a warrants-exchange offer originally slated to expire March 26.

Last week the Hingham, Mass.-based clothing retailer said one of its largest warrant holders, Chicago’s Pentwater Capital Management, sued the company in a Delaware court over planned amendments to the warrant-exchange in question. Pentwater accused Talbots (NYSE: TLB) and its merger partner, BPW Acquisition Corp., of pressuring it to accept less-favorable terms for the previously agreed upon warrant-exchange offer.

The new warrant-exchange offer deadline is today at 6 p.m. The Talbots said roughly 88 percent of the exchange’s affected warrants were tendered as of March 26. Talbots said the exchange-offer will be consummated once 90 percent of the affected BPW warrants are tendered.

According to Pentwater’s legal complaint, it owns 9 percent of the affected warrants as well as an undisclosed amount of common stock issued by BPW. BPW is a special-purpose acquisition company affiliated with New York-based private equity firm Perella Weinberg Partners.

Pentwater has petitioned the court to prevent the closing of the warrant exchange and prohibit BPW from amending the original warrant-exchange agreement. The suit was filed after BPW amended the original warrant-exchange agreement. Pentwater claims the changes are unfavorable to warrant holders on a number of levels.

On Friday, the court struck down Pentwater's request for a temproary restraining order.

If successful, Pentwater’s request would likely delay the Talbots-BPW merger, as the exchange offer is the “last remaining substantive condition” to the deal’s completion, according to the legal complaint.

In a regulatory filing late Thursday, Talbots said the suit is without merit and will be challenged “vigorously.”