Business Context and Reporting Period
This Form 8-K Current Report, filed on May 26, 2011, by DSW Inc. (DSW), announces the completion of a previously announced merger with Retail Ventures, Inc. (Retail Ventures). The transaction involved Retail Ventures merging with and into DSW MS LLC, a wholly owned subsidiary of DSW. As a result, Retail Ventures ceased to exist as a separate public entity, and its common shares were delisted from the New York Stock Exchange.
Key Financial Metrics and Transaction Terms
The filing details the structural and contractual changes resulting from the merger but does not provide specific revenue, profit, cash flow, or margin figures for the combined entity in this document.
- Exchange Ratio: Each outstanding Retail Ventures common share was converted into the right to receive 0.435 DSW Class A Common Shares, unless the holder elected to receive DSW Class B Common Shares.
- Debt Assumption: DSW MS LLC assumed all obligations of Retail Ventures regarding the 6.625% Mandatorily Exchangeable Notes due September 15, 2011 (PIES).
- Financial Statements: The filing states that financial statements of the acquired business and pro forma financial information will be filed in an amendment to this report within 71 days.
Material Changes Versus Prior Period
The primary material change is the consolidation of Retail Ventures into DSW, fundamentally altering the corporate structure and share capital.
- Termination of Agreements: DSW and Retail Ventures terminated the Amended and Restated Shared Services Agreement (covering risk management, tax, IT, etc.) and the Exchange Agreement regarding Class B shares.
- Amendment of Separation Agreement: The Master Separation Agreement dated July 5, 2005, was amended to terminate most provisions, except for registration rights for certain affiliates of Retail Ventures, including Jay L. Schottenstein.
- Corporate Governance: DSW amended its Articles of Incorporation to permit the conversion of Class B Common Shares to Class A Common Shares on a one-for-one basis and removed references to Retail Ventures as a related party.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future performance, or specific risk factors beyond the standard disclosures regarding the completion of the merger.
- Unusual Items: The transaction involved complex debt restructuring, including supplemental indentures and collateral agreements with HSBC Bank USA to facilitate the assumption of the PIES.
- Contingencies: The termination of the Exchange Agreement is contingent upon Merger Sub satisfying obligations related to the PIES.
Important Facts for Investor Verification
- Verify the final share count and capitalization structure following the 0.435 exchange ratio.
- Review the upcoming amendment to this 8-K (due within 71 days) for the required pro forma financial information and financial statements of Retail Ventures.
- Confirm the status of the 6.625% Mandatorily Exchangeable Notes due September 15, 2011, now assumed by DSW MS LLC.
- Check the amended Articles of Incorporation (Exhibit 3.1) for the new conversion rights between Class A and Class B shares.