Ann Taylor may be primping herself for a sale — but it's not clear how many suitors will come knocking.
Shares of Ann Inc., the women's clothier's New York-based parent, rose nearly 5 percent Tuesday on a news report from Reuters that the company had hired JPMorgan Chase to explore a potential sale.
The jump followed a day-earlier rally, spurred by the news that a pair of activist hedge funds, Engine Capital LP and Red Alder LLC, were prodding the retailer to put itself on the block.
Ann reps didn't comment Tuesday.
Insiders say an auction would likely attract buyout funds, including TPG, Leonard Green & Partners, and possibly Golden Gate Capital, which earlier this year disclosed a 9.5-percent stake in Ann, calling the shares undervalued.
Engine Capital and Red Alder, which together own little more than 1 percent of Ann's stock, argued that Ann could fetch as much as $50 to $55 a share if acquired by a private-equity fund or an overseas retailer.
Ann shares — which hit a 52-week high of $43.61 in May after trading as low as $30.71 in February — gained $1.83, or 4.8 percent, to close at $41.87, giving the company a market cap of $1.87 billion.
That makes Ann a bit pricey for a buyout, according to Richard Jaffe, a retail analyst at Stifel, a New York investment bank.
"We view Ann Inc. as a nearly mature business with limited square-footage growth remaining," he wrote in a report.
In their Monday letter, the activist hedge funds said they had held discussions with Ann's management in recent weeks about the company's strategic options and had grown impatient with a lack of progress.
"We think the status quo is untenable," the funds said.
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