L Brands, Inc. (NYSE:LB) today announced its Board of Directors has unanimously approved a plan to separate the company into two independent, public companies: Bath & Body Works, one of the world's leading bath, body and home fragrance retailers, and Victoria's Secret, including Victoria's Secret Lingerie, PINK and Victoria's Secret Beauty, a leading retailer of intimates and beauty products. The company expects to create these companies through a tax-free spin-off of Victoria's Secret to L Brands' shareholders. The spin-off will enable each company to maximize management focus and financial flexibility to thrive in an evolving retail environment and deliver profitable growth.
"In the last ten months, we have made significant progress in the turnaround of the Victoria's Secret business, implementing merchandise and marketing initiatives to drive top line growth, as well as executing on a series of cost reduction actions, which together have dramatically increased profitability," said Sarah Nash, Chair of the Board. "As a result of these efforts, Victoria's Secret is now well-positioned to operate as a standalone, public company. Further, both Bath & Body Works and Victoria's Secret are leaders in their respective markets, and, as separate businesses, each will be ideally positioned to benefit from a sharpened focus on pursuing growth strategies best suited to each company's customer base and strategic objectives. With this in mind, the Board believes that this path forward will return the highest value to shareholders and that the separation will allow each business to achieve its best opportunities for growth."
As previously announced, the L Brands Board has been evaluating the possibility of either a spin-off or sale of Victoria's Secret with input from its financial advisors, Goldman Sachs and JP Morgan. Throughout the review process, the company received interest from and held discussions with multiple potential buyers.
Ultimately, the Board concluded that the spin-off of Victoria's Secret into a separate, public company would provide shareholders with more value than a sale. The benefits of separating these two businesses include distinct strategic and management focus on specific operational and growth priorities and tailored capital deployment strategies based on each company's operating and financial model, and the ability for the investment community to value each business independently and create significant value and certainty for our customers, employees and shareholders. The proposed transaction will create two highly focused companies:
Bath & Body Works (L Brands): Leading Bath, Body and Home Fragrance Retailer
Bath & Body Works is one of the world's leading specialty retailers. Home to America's Favorite Fragrances®, Bath & Body Works offers a breadth of exclusive fragrances for the body and home, including top-selling collections for body lotion and body cream, body wash, hand soap, hand sanitizers, fragrance diffusers, fine fragrance mist and candles. The business has a demonstrated record of consistent sales and operating income growth, as well as a proven ability to respond quickly to evolving customer tastes with a high-speed sourcing and logistics model. With high brand awareness and a loyal customer base, the business is well positioned for continued growth in North America, as well as globally.
Victoria's Secret: Iconic Lingerie and Beauty Retailer
Victoria's Secret is an iconic global brand of women's intimate and other apparel, personal care and beauty products. It sells products through two brands, Victoria's Secret and PINK. Victoria's Secret is a category-defining global lingerie brand with a leading market position and a rich, 40-year history of serving women across the globe. PINK is a lifestyle brand for the college-oriented customer, built around a strong intimates core. It also sells beauty products under both the Victoria's Secret and PINK brands. Together, Victoria's Secret, PINK and Victoria's Secret Beauty support, inspire and celebrate women through every phase of their life. The business recently implemented a profit improvement plan, and took actions to improve its product assortment, inventory mix and marketing to meet customers' needs and evolve to more diverse and inclusive brand positioning. As a result of these efforts, Victoria's Secret delivered a 2020 fall season (third and fourth quarters) adjusted operating income increase of more than 300 percent and is well positioned to continue to drive global growth.
Both businesses have strong, well-tenured leadership teams with significant industry experience, well suited to lead the two companies going forward in their distinct markets.
Andrew Meslow, Chief Executive Officer of L Brands, will continue to hold this position and lead Bath & Body Works following the spin-off.
Martin Waters, Chief Executive Officer of Victoria's Secret, will continue to lead the new standalone Victoria's Secret business following the separation.
Additions to the management teams and the composition of the boards of directors for both companies will be named in due course.
The spin-off is expected to be effected through a pro-rata distribution to L Brands shareholders of common stock of a newly-formed entity holding certain assets and liabilities comprising the Victoria's Secret business. The spin-off is generally expected to qualify as tax free to L Brands and its shareholders for U.S. federal income tax purposes. The transaction is currently expected to be completed in August 2021, subject to certain customary conditions, including final approval of the L Brands Board and effectiveness of a Form 10 registration statement filed with the U.S. Securities and Exchange Commission.