updated 2/6/2006 2:12:20 PM ET 2006-02-06T19:12:20

Talbots Inc. said Monday it has agreed to acquire women’s apparel retailer J. Jill Group Inc. for about $517 million, trumping an earlier unsolicited offer from Liz Claiborne Inc., which said it’s not inclined to sweeten its bid.

Monday’s deal would give Talbots ownership of a struggling brand catering to affluent older women that has recently seen its retail store expansion cannibalize its more profitable and established catalog operations.

Talbots’ all-cash offer of $24.05 a share represents a 25 percent premium over Friday’s closing price of J. Jill.

J. Jill started out in 1987 selling exclusively through catalogs, but has opened 200 stores nationwide over the past six years, mostly in malls. It targets a much-sought-after and growing demographic: wealthy women aged 35 and older.

Retail business now accounts for more than 60 percent of company sales. J. Jill has acknowledged the shift has hurt its more profitable catalogs, contributing to a $1.53 million loss in the first nine months of last year that followed a $6.1 million profit in the same period a year earlier.

Talbots executives say their 59-year-old company has experience balancing catalog, online and retail operations for its own brand that will help solve the dilemma at J. Jill, which will be maintained as a separate brand. While Talbot’s also markets men’s and children’s clothing, its traditionally styled fashions are designed to appeal to women 35 and older.

“We see no reason why we cannot restore J. Jill Group to operating profitability,” Edward Larsen, Talbots’ senior vice president and chief financial officer, told analysts in a conference call.

Talbots’ $24.05-per-share offer tops the unsolicited $18-per-share bid Liz Claiborne made for J. Jill in November. Liz Claiborne later entered into a confidentiality agreement with J. Jill allowing it to examine its financial information.

In a statement Monday, Liz Claiborne’s chairman and chief executive, Paul R. Charron, said, “We are disappointed that we were unable to acquire J. Jill at a price that makes sense for our shareholders. However, we are financially disciplined and will not overpay.”

Liz Claiborne shares fell 7 cents to $34.25 on the NYSE.

Arnold Zetcher, Talbots’ chairman, president and CEO, said in an interview his company privately expressed interest in buying J. Jill more than six months ago.

After Liz Claiborne’s offer became public, “We kind of jumped in with both feet,” Zetcher said.

The boards of both Talbots and J. Jill have approved the deal and expect it to close in the spring, perhaps as soon as early May.

Talbots expects to see about $25 million in savings next year by combining merchandise buying, shipping, ordering and other backroom operations, Talbots executives said.

J. Jill’s Quincy headquarters south of Boston will continue to operate separately from its own headquarters just 7 miles away in Hingham, Zetcher said.

He said it was too soon to say whether they would change J. Jill’s plans to add about 40 stores this year. J. Jill’s growth will not affect Talbots’ plans to add 50 stores this year, Zetcher said.

Talbots, with 1,083 stores, is nearly four times as big as J. Jill, with about $1.8 billion in 2005 revenue to J. Jill’s $450 million.

The combined company will operate stores in 47 states, the District of Columbia, Canada, and the United Kingdom.

Talbots said it would finance the acquisition with amounts from its new $400 million credit facility and cash on hand.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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