Belk agrees to sell the company for $3 billion to Sycamore Partners

Charlotte-based Belk Inc. has agreed to be purchased by New York-based private equity firm Sycamore Partners for $3 billion, including the company’s debt.

The deal effectively ends local control of the 127-year-old company that began in downtown Monroe and grew into the largest family-owned department store chain in the country.

The department store chain said Monday that its headquarters will remain in Charlotte, and Tim Belk will remain chief executive officer. The deal is subject to regulatory approval and is expected to close in the fourth quarter this year, according to a securities filing.

Belk spokeswoman Jessica Graham said there are no plans currently to cut any of the 1,300 jobs at the company’s corporate offices on Tyvola Road. She also said no Belk stores will close as a result of the announcement.

“We plan to grow Belk by executing our current strategic initiatives and undertaking new growth initiatives together with Sycamore. This transaction is an across-the-board win for our stakeholders,” CEO Belk said in a statement.

The news caps off months of uncertainty that began in April when Belk said it had hired investment bank Goldman Sachs to help it explore alternatives to its current plans, indicating a possible sale. The Observer reported last month that Sycamore Partners was preparing to make an offer to buy the department store chain.

“We have great respect for Belk’s management team and associates, its deeply rooted brand, its footprint of stores and its growing online presence,” said Stefan Kaluzny, Sycamore Partners managing director. “Belk is exactly the kind of investment we look for: an outstanding brand with a proven success formula and the potential for further growth.”

Charlotte institution

Now one of the Charlotte area’s biggest employers, Belk was founded in Monroe in 1888 by William Henry Belk, who named his first store New York Racket. Over the years, the chain has expanded to 296 stores across 16 states, mostly in the Southeast.

Belk is controlled by a third generation of Belk family members, including CEO Tim Belk and his brother and Chief Operating Officer John Belk.

The family name is all over Charlotte: It adorns a freeway, uptown theater and college football bowl game. The company’s former CEO, the late John Belk, was a longtime Charlotte mayor, and family members have headed the Charlotte Chamber.

In the late 1960s, John Belk and fellow retailer George Ivey built SouthPark mall, spurring dramatic growth in southeast Charlotte that continues today in the SouthPark area, as seen in the construction boom of new homes and apartments, offices and more restaurants and retailers.

Challenges

The retailer has faced increasing challenges as consumers shift more to online shopping. Belk was relatively late to focus on e-commerce: Until 2008, its website offered only gift cards, gift registries and a small selection of home goods. Since then, the company has invested $150 million to overhaul its website and has hired more IT workers.

While online sales have soared over the years – growing by about 43 percent last year – they still represent a relatively small portion of Belk’s overall sales.

Leadership could also be another reason Belk put itself up for sale, analysts say. No other Belk family members are listed among the top management at the company, and people familiar with the company have said there doesn’t appear to be a fourth generation of Belks being groomed to run the company.

Some of Charlotte’s best-known retail names have been snapped up in the past year. Matthews-based supermarket Harris Teeter was sold to Cincinnati-based Kroger, and Family Dollar’s sale to Chesapeake, Va.-based Dollar Tree closed earlier this month.

Last year, Belk’s sales totaled $4.1 billion, an increase of 1.8 percent over the prior year. Sales at stores open at least a year rose 1.5 percent for the year, and online sales grew 43.3 percent.

But the company’s profits dipped. Belk said its earnings totaled $146 million for last fiscal year, a 7.8 percent drop from the year before. The company attributed the decline to Belk’s investments in e-commerce and remodeling stores.

The company recently said it is laying off 111 employees at its e-commerce distribution and fulfillment center in Pineville as it expands similar operations in Jonesville, S.C.

Although the stock doesn’t trade on major exchanges, Belk’s shares trade over the counter, and the company reports its quarterly results and other financial details like a publicly traded company. As part of the deal, Belk shareholders will receive $68 a share in cash for each share of Belk common stock they own, the company said.

This is a breaking news story and will be updated.

This story was originally published August 24, 2015 at 10:50 AM with the headline "Belk agrees to sell the company for $3 billion to Sycamore Partners."