J Crew - Capri collection

CHICAGO | Tue Mar 1, 2011 - J. Crew Group Inc (JCG.N) will once again be a private company after shareholders approved a $2.86 billion deal for the retailer to be acquired by TPG Capital TPG.UL and Leonard Green & Partners LP.

Private equity firms TPG and Leonard Green will buy all of J. Crew's outstanding common stock for $43.50 per share in a transaction that should close on or around March 7, the retailer said. The deal was announced in November.

The deal was approved despite a recommendation against it by influential proxy advisory firm Institutional Shareholders Services Inc.

Holders of nearly 41.1 million shares voted in favor of the deal, while holders of close to 13.3 million shares voted against it, J. Crew said.

The planned sale of the company sparked a flood of shareholder lawsuits protesting the share price and asserting that the retailer's chief executive, Millard Drexler, had breached his fiduciary duties to investors.

Drexler was in discussions with the private equity firms for nearly seven weeks without informing the company's board, raising questions about corporate governance.

The clothing retailer, which operates a chain of stores, a catalog and website, last month settled shareholder litigation over its proposed takeover by agreeing to extend the so-called "go shop" period that allowed it to look for a different buyer. It failed to turn up a richer offer.

ISS recommended that shareholders reject the takeover "based on the less-than-compelling strategic rationale to sell the company at a lower-than-prevalent market premium."

ISS also cited "serious issues in the sales process," as well as a discounted cash flow valuation that was above the offer price.

In response, J Crew said the proposed transaction "offers a full and fair price for J.Crew's shareholders."

"Unfortunately, ISS's report is based on flawed analyses, and we believe that ISS has reached the wrong recommendation with respect to the contemplated transaction with TPG and Leonard Green," the company said.

Shares of J. Crew were up 43 cents to $43.55 in late-morning trading on the New York Stock Exchange.

(Reporting by Jessica Wohl in Chicago; additional reporting by Jessica Hall in Philadelphia; Editing by Lisa Von Ahn and John Wallace)