updated 11/23/2010 12:16:05 PM ET 2010-11-23T17:16:05

J. Crew says it will be taken private in a $3 billion deal with two investment firms, including its former parent.

Under the deal, J. Crew shareholders will receive $43.50 per share from private equity firms TPG Capital and Leonard Green & Partners. That is a 16 percent premium to the stock's closing price of $37.65.

CEO Mickey Drexler, the former Gap Inc. chief credited with turning J. Crew around around since coming aboard in 2003, will remain in that role and retain a stake in the retailer.

TPG took a majority stake in J. Crew Group Inc. in 1997 and remained majority shareholder until the company went public in 2006.

Private equity buyouts are rising after a lull during the recession. Gymboree Corp. in October agreed to be bought by Bain Capital for $1.8 billion.

J. Crew, based in New York, also said third-quarter net income fell 14 percent to $37.8 million, or 58 cents per share. That was better than the 54 cents per share analysts expected.

Net income fell 14 percent to $37.8 million, or 58 cents per share, from $43.9 million, or 67 cents per share last year. Analysts polled by Thomson Reuters, on average, expected net income of 54 cents per share.

Revenue rose 4 percent to $429.3 million, just shy of the $430.3 million analysts expected.

Revenue at stores open at least a year fell 1 percent. The figure is considered a key measure of a retailer's performance because it excludes stores that open and close during the year.

J. Crew significantly cut its yearly guidance to $2.08 to $2.13 per share from prior guidance of $2.25 to $2.35 per share, the second quarter in a row it cut its outlook. Analysts expected $2.24 per share.

Wall Street Strategies analyst Brian S. Sozzi said J. Crew is one of the more expensive specialty retail stocks, but said any private equity buyers would get a "strong management team led by Mickey Drexler . a productive mall-based store portfolio and a growing outlet business."

J. Crew had a revolving door of management until it hired Drexler to run the company in 2003. He is credited with revitalizing the fashion chain, which had struggled with an identity crisis by pushing it to return to its preppy roots and offer more upscale merchandise.

After a tough 2008 when the company suffered a loss and cut jobs and costs, during the recession, J. Crew recovered has shown relative strength. In its most recent fiscal year, which ended in January, net income more than doubled as revenue rose 11 percent to $1.58 billion. Its profit also rose in the subsequent two quarters this year on better sales and margins.

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