Talbots Prepares to Fend Off Private Equity Takeover

Beleaguered retailer Talbots (NYSE: TLB) has adopted a so-called poison pill stockholder rights plan, following media reports that a private equity firm is considering buying the company.

Under the new plan, if a single investor buys a stake of more than 10%, Talbots may issue shares at a discount to all other shareholders. The dilution of the stock would make any hostile takeover more difficult.

On Monday, a U.S. Securities and Exchange Commission filing revealed that New York-based private-equity firm Sycamore Partners had taken a 9.9% stake in Talbots. That makes it Talbots' second largest shareholder.

Sycamore Partners said in the filing that it intends to take an active role in helping to turn around operations, and said the company was undervalued. Talbots has remodeled some stores and closed others since being hit hard by the recession. It has also tried to broaden its appeal, but the retailer warned in June that earnings in the current quarter would be lower.

Talbots shares are down more than 50% year to date.