Aug. 8 (Bloomberg) -- Lululemon Athletica Inc. founder Chip Wilson agreed to sell half his stake in the yogawear retailer to Advent International Corp. for $845 million and forgo pursuing a buyout for at least year, ending a fight with the board.
Wilson, who had voiced his dissatisfaction with the company’s direction after stepping down as chairman, also agreed with Advent to name David Mussafer and Steve Collins to the board, according to a statement yesterday. The stake sold represents about 13.9 percent of the shares outstanding.
The deal caps months of disagreements between Lululemon and its outspoken founder, who said in June he voted unsuccessfully against the re-election of Michael Casey, his successor as chairman. The agreement also lets management, which has spent much of the past year recovering from a widespread pants recall, turn its full focus to reigniting sales growth and expanding overseas.
“By doing this, he has diluted his voice and influence on the company,” Betty Chen, an analyst at Mizuho Securities in San Francisco, said of Wilson in an interview. “Certainly, the company would prefer to start to minimize some of the negative PR from Chip.”
Chen rates the shares hold.
The shares jumped 5.6 percent to $41.20 at 8:26 a.m. in early trading in New York. Vancouver-based Lululemon had slid 34 percent this year through the close of regular trading yesterday.
Advent, a Boston-based private-equity firm, was an early backer of Lululemon and helped it expand from a regionally focused retailer to a global brand. In 2005, Wilson sold a 48 percent stake in his company to Advent and Highland Capital Partners for $93 million. Advent, which exited its original investment in June 2009, said in yesterday’s statement that it worked closely with Wilson and five of the current directors, including Casey, during its expansion.
Wilson, a 58-year-old billionaire and meditation activist, founded Lululemon in 1998 after taking a yoga class and built a devoted following for the brand in the U.S. and Canada with unconventional methods, such as local brand “ambassadors” and free yoga sessions.
The company hit a rough patch last year when it recalled its black Luon yoga pants because they became too transparent when the wearer bent over. About two weeks after the recall, Lululemon said Chief Product Officer Sheree Waterson was stepping down. Two months later, Chief Executive Officer Christine Day announced plans to retire.
Later that year, Wilson drew controversy when he said Lululemon’s pants “don’t work for some women’s bodies.” He apologized a week later for the remarks, which he made on Bloomberg Television.
The company said in December that TOMS shoes executive Laurent Potdevin would take over as CEO. That same month, Wilson said he would resign as chairman prior to the June annual meeting. Wilson’s involvement in the company may have scared off some potential candidates to replace Day as CEO, analysts said in November.
Potdevin has been shifting company’s international strategy away from a pattern of first opening showrooms -- smaller locations with limited selections and shorter hours -- before finding the right staff and locations for full, permanent stores. The company will now run those processes at the same time, and it’s also hired a general manager for Asia.
Lululemon will have a presence in eight countries outside of North America through stores, partnerships or showrooms by the end of 2014, with plans for more than 20 stores in Asia and Europe by the end of 2017, Potdevin has said.
In June, Wilson said that the company had become too concerned with short-term results and that the company was losing sight of its product, culture, brand and longer-term goals. The clash sparked speculation that Wilson would attempt to lead a buyout of the chain.
Wilson decided to sell part of his stake to Advent in early July and sought Lululemon’s support for the deal later in the month, according to a person familiar with the matter.
Mussafer will become co-chairman with Casey, the company said yesterday. The two new directors will join the board at the closing of the transaction, expanding it to 12 members from 10.