Ann Taylor will join a stable of retail clothing stores owned by Ascena, including Lane Bryant, Justice, Dress Barn and Cacique, giving the combined company annual sales of $7.3 billion.
A push for the sale of the Ann Inc. began in earnest last August when major shareholders Engine Capital LP and its partner Red Alder LLC urged the board to put the company on the block.
The retailer had suffered same-store sales declines in three of its past quarters as up-and-coming fast-casual clothing chains ate up market share.
The investors said in a letter to Ann's board that the company was an "incredibly suitable candidate" for private equity given the financial conditions at the time, but also that a large international retailer could speed up the company's global brand expansion.
That retailer made itself known Monday.
Though its name is not well known among shoppers, Ascena, based in Mahwah, New Jersey, owns about 3,900 stores under a number of names in the U.S. and Canada.
Ann had 1,030 Ann Taylor, Ann Taylor Factory, Loft, Loft Outlet and Lou & Grey stores in 47 states, the District of Columbia, Puerto Rico and Canada.
The combined company could better enable it to weather the heavy discounting that has hammered the retail industry as competition heats up.
"The transaction will make us part of a larger organization with a diversified portfolio of brands focused on the women's apparel market, a strong operating platform and a powerful financial base," said Ann CEO Kay Krill in a printed statement.
Ann shareholders will own about 16 per cent of Ascena once the transaction closes. They'll get $37.34 in cash and 0.68 of a share of Ascena Retail Group Inc. stock in exchange for each of their shares.
The companies put the total price at $47 per share. That's a 21 per cent premium to Ann Inc.'s Friday closing price of $38.71.
The buyout, which was unanimously approved by the boards of both companies, is targeted to close later this year and doesn't require approval by Ascena stockholders.
Shares of Ann Inc., based in New York, jumped $7.55, or 19.5 per cent, to $46.26 in morning trading on Monday.