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Allen Questrom to join Deb Shops as Non-Executive Chairman PHILADELPHIA, July 27 /PRNewswire-FirstCall/ -- Deb Shops, Inc.(Nasdaq: DEBS) today announced the signing of a definitive agreement inwhich Lee Equity Partners, LLC through its affiliate DSI Holdings, LLC("Lee Equity") will acquire 100% of the outstanding shares of Deb Shops for$27.25 per share of common stock in an all-cash transaction. Total equityvalue of the transaction is approximately $395 million. Lee Equity willfinance this acquisition through cash and new committed credit facilities.Subject to customary regulatory requirements and shareholder approval, thetransaction is expected to close in the third fiscal quarter of 2007. Marvin Rounick, President and CEO of Deb Shops, stated: "We are excitedabout entering into a transaction with Lee Equity. We believe thistransaction is in the best interests of all shareholders. Tom Lee is one ofthe icons of the private equity business, and we believe the fact that hisorganization chose to acquire our company is a real testament to thebusiness that the people of Deb Shops have built. We have had manywonderful accomplishments during our long and successful history and thistransaction serves as an important step in the growth of our business. Weare pleased that Lee Equity has expressed a commitment to continue to buildand grow Deb Shops' business." Under Lee Equity's ownership, it is expected that Allen Questrom, whohas over 40 years of retail apparel experience, will serve as non-executivechairman of the Company and will provide significant strategic directionand leadership to the Company's current senior management team. Further,Mr. Rounick and Warren Weiner, the Company's current Executive VicePresident, have entered into agreements whereby they have agreed to provideconsulting services to the Company for a period of three years after theclosing of the acquisition. "We are delighted to announce our acquisition of Deb Shops, a specialtyretailer with significant growth potential, both in terms of revenues andoperational improvement," stated Thomas H. Lee, President of Lee EquityPartners. "The transaction with Deb Shops, a company which Messrs Rounickand Weiner have guided to many years of successes, creates a terrificopportunity for our firm. Given our industry expertise in retail and ourfocus on post-investment operating improvement, we are excited tocollaborate with Deb Shops existing management to refresh the storeoperational model and to execute a new store growth plan." Allen Questrom, Senior Advisor of Lee Equity Partners, stated: "In avery competitive junior apparel segment, Deb Shops is differentiated by itsfashionable, value-oriented merchandise and strong positioning with juniorregular and plus-size customers. We look forward to growing the company'salready strong customer base and continuing to roll out its plus-sizemerchandise offering. The company's demonstrated strength in its markets isa testament to the quality of the franchise that the current leadership hasbuilt. We believe that with our firm's involvement, Deb Shops can maintainand grow its wonderful relationship with its customers, while presenting arenewed, more exciting offering in the years to come. I'm looking forwardto working with the Deb team." Deb Shops, Inc.'s Board of Directors has approved the proposed merger,which is subject to approval by the Company's stockholders and othercustomary closing conditions, including governmental approvals. Lee Equityhas obtained commitments from Marvin Rounick, Warren Weiner and JackRounick, a Director and Assistant Secretary of Deb Shops, and certain oftheir respective affiliates (representing an aggregate of approximately64.3% of the shares of Deb Shops common stock, and all of the shares of theDeb Shops preferred stock, currently outstanding) to vote all Deb Shops,Inc. shares owned by them in favor of the merger. Upon completion of themerger, none of Mr. Marvin Rounick, Mr. Weiner, nor Mr. Jack Rounick willhave any ownership interests in the Company. In connection with the proposed merger, Lehman Brothers acted asfinancial advisor to the Company and rendered a fairness opinion to theCompany's board of directors. Morgan, Lewis & Bockius LLP acted as legalcounsel to the Company. Bear Stearns acted as financial advisor and WeilGotshal & Manges LLP acted as legal counsel to Lee Equity. Barclays Capitalwill be the exclusive financing provider to Lee Equity for the transaction. About Deb Shops, Inc. Deb Shops, Inc. is a national specialty retailer of fashionableapparel, shoes and accessories for juniors in both regular and plus sizes.The Company operates 337 specialty apparel stores in 42 states under theDEB and Tops 'N Bottoms names. About Lee Equity Partners, LLC Lee Equity Partners, LLC is a New York private investment firm foundedby Thomas H. Lee in August 2006. Mr. Lee is a leader in the private equityindustry, and his new firm, Lee Equity Partners, continues his longstandingfocus on growth-oriented investing. In addition to Mr. Lee, the Lee Equityteam is led by Mark K. Gormley, Yoo Jin Kim, David J. Morrison, andBenjamin A. Hochberg. Allen Questrom serves as a Senior Advisor to theFirm. Lee Equity integrates a deep experience base in selected industries,including retail and consumer products, with an intensive, fact-basedapproach to due diligence, and a world-class strategy and operationscapability to create returns for its investors. Cautionary Note Regarding Forward Looking Statements The Company has made in this release, and from time to time mayotherwise make, "forward-looking statements" (as that term is defined underfederal securities laws) concerning the Company's future operations,performance, profitability, revenues, expenses, earnings and financialcondition. This release includes, in particular, forward-looking statementsregarding expectations of future performance, store openings and closingsand other matters. Such forward-looking statements are subject to variousrisks and uncertainties. Actual results could differ materially from thosecurrently anticipated due to a number of factors. Such factors may include,but are not limited to, the Company's ability to improve or maintain salesand margins, respond to changes in fashion, find suitable retail locationsand attract and retain key management personnel. Such factors may alsoinclude other risks and uncertainties detailed in the Company's filingswith the Securities and Exchange Commission, including the Company's AnnualReport on Form 10-K for the fiscal year ended January 31, 2007. The Companyassumes no obligation to update or revise its forward-looking statementseven if experience or future changes make it clear that any projectedresults expressed or implied therein will not be realized. Important Merger Information In connection with the proposed acquisition of Deb Shops by DSIHoldings, LLC ("DSI"), through its wholly-owned subsidiary, DSIAcquisition, Inc., Deb Shops intends to file a proxy statement with theSecurities and Exchange Commission (the "SEC"), and Deb Shops and DSIintend to file other relevant materials with the SEC. Before making anyvoting decision with respect to the proposed acquisition, shareholders ofDeb Shops are urged to read all relevant documents filed with the SEC whenthey become available, including Deb Shops' proxy statement, because theywill contain important information about the proposed transaction, DebShops and DSI. A definitive proxy statement will be sent to holders of DebShop stock seeking their approval of the proposed transaction. Investors and security holders will be able to obtain the documents(when available) free of charge at the SEC's web site, http://www.sec.gov .In addition, Deb Shops shareholders may obtain free copies of the documentsfiled with the SEC when available by contacting Deb Shops' Barry J. Susson,Chief Financial Officer and Assistant Secretary. Such documents are notcurrently available. You may also read and copy any reports, statements andother information filed by Deb with the SEC at the SEC public referenceroom at 100 F Street, N.E. Room 1580, Washington, D.C. 20549. Please callthe SEC at 1-800-SEC-0330 or visit the SEC's website for furtherinformation on its public reference room. Deb Shops and its directors, executive officers and other members ofmanagement and employees may be deemed to be participants in thesolicitation of proxies from shareholders in respect of the proposedtransaction. Information regarding the directors and executive officers ofDeb Shops is available in the 2006 Annual Report on Form 10-K, filed withthe SEC on April 13, 2007, and the proxy statement for Deb Shops' 2007annual meeting of shareholders, filed with the SEC on April 26, 2007. Additional information regarding the interests of such potentialparticipants will be included in the proxy statement and the other relevantdocuments filed with the SEC when they become available.
