(Bloomberg) -- The Container Store Group Inc. has agreed to sell $40 million of preferred equity under a partnership with Beyond Inc., which could obtain roughly 40% equity ownership of the retailer if that investment is converted into common stock.
The chain — known for closet organizers, storage shelves and container bins — will issue a new series of preferred stock that can be converted into common shares at $17.25 each, The Container Store said in a statement Tuesday. Its shares surged as much as 29% Wednesday morning to $13.86, though they are still down by nearly two-thirds for 2024.
The Container Store has been struggling with declining revenue and a pile of debt maturing in 2025 and 2026. In May, the company said it hired Latham & Watkins and JPMorgan Chase & Co. to consider strategic alternatives, which typically involves soliciting takeover offers or mulling other steps to deal with financial distress.
Beyond is the owner of retail brands including Bed Bath & Beyond, Overstock and Zulily. Its partnership with The Container Store will involve the opening of co-branded spaces, a loyalty program and making The Container Store products available on Beyond websites.
The transaction requires an amendment or refinancing of The Container Store’s credit facilities, it said. The firm did amend an existing term loan with JPMorgan and other lenders to waive certain covenants and added a stipulation that allows it “to enter into a qualified financing transaction” by Nov. 15, according to a regulatory filing.
The Container Store recently adopted a poison-pill provision, a method used to ward off unwanted takeovers by making them prohibitively expensive, after it saw a “rapid and significant accumulation” of its shares by a single stockholder.
©2024 Bloomberg L.P.
