Talbots Agrees to Acquire J. Jill

Talbots Inc. said Monday that it had agreed to acquire women’s apparel retailer J. Jill Group Inc. for about $517 million, trumping an earlier unsolicited offer from Liz Claiborne Inc., which said it wasn’t inclined to sweeten its bid.

The deal would give Talbots ownership of a struggling brand catering to affluent older women that recently has seen its retail store expansion cannibalize its more profitable and established catalog operations.

J. Jill shares soared $4.37, or 23%, to $23.57 on Monday. Talbots shares fell 93 cents, or 3.4%, to $26.34.

Talbots’ all-cash offer of $24.05 a share represents a 25% premium over Friday’s closing price of J. Jill.

J. Jill started out in 1987 selling exclusively through catalogs but has opened 200 stores nationwide over the last six years, mostly in malls. It targets a much-sought-after and growing demographic: upper-income women ages 35 and older.

Retail business now accounts for more than 60% of company sales. J. Jill has acknowledged that the shift has hurt its more profitable catalogs, contributing to a $1.53-million loss in the first nine months of last year, contrasted with a $6.1-million profit a year earlier.

Talbots executives say their 59-year-old company has experience balancing catalog, online and retail operations for its own brand that will help solve the problem at J. Jill, which will be maintained as a separate brand. Talbots’ traditionally styled fashions are designed to appeal to women 35 and older.

“We see no reason why we cannot restore J. Jill Group to operating profitability,” Edward Larsen, Talbots’ senior vice president and chief financial officer, told analysts in a conference call.

Talbots, with 1,083 stores, is nearly four times as big as J. Jill. It had sales of $1.8 billion in 2005, compared with J. Jill’s $450 million.