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Illustration: Rebecca Zisser/Axios

Sycamore Partners on Wednesday backed out of its agreement to pay $525 million for a majority stake in women's lingerie retailer Victoria's Secret, claiming current owner L Brands (NYSE: LB) breached deal terms by closing stores, furloughing store staff, cutting senior executive pay, and defaulting on lease agreements.

Why it matters: This sets up a legal battle between standard M&A terms that have come into conflict due to the coronavirus pandemic and government lockdowns, and might set some precedent.

Details: The merger agreement includes a clause requiring L Brands to run VS in an ordinary manner prior to completion. But it also explicitly exempts "pandemics" and "police actions" from constituting material adverse effects.

  • Irony: Sycamore claims in court filings that VS' decision to stop paying rent on closed stores is among the actions that hurt the business' fundamental value. This is the same Sycamore that owns Staples, which still refuses to pay rent on stores that remain open.
  • It also makes a big point of L Brands not asking Sycamore for permission to close most of its 1,600 stores, although it's unclear if L Brands never asked or if it did and Sycamore denied the request. Either way, it seems irrelevant given that VS stores wouldn't be considered "essential businesses" in most locked-down states.

L Brands says it plans to pursue all legal remedies, including asking a judge to force deal completion via a court order of "specific performance." Yup, some serious shades of 2009 here.

Bigger picture: No one yet knows how physical apparel retailers will return to "normal." Even if consumers return to indoor shopping malls, it may take longer before they're willing to try on clothes that someone else might have tried on before them.

Go deeper

Biden will reverse Trump's attempt to lift COVID-related travel restrictions

Photo: Tasos Katopodis via Getty

The incoming Biden administration will reverse President Trump's last-minute order to lift COVID-19 related travel restrictions, Jen Psaki, the incoming White House press secretary, tweeted.

Why it matters: President Trump ordered entry bans lifted for travelers from the U.K., Ireland, Brazil and much of Europe to go into effect Jan. 26, but the Biden administration will "strengthen public health measures around international travel in order to further mitigate the spread of COVID-19," Jen Psaki said. Biden will be inaugurated on Wednesday, Jan. 20 and Trump will no longer be president by the time the order is set to go into effect.

Dominion sends cease and desist letter to My Pillow CEO Mike Lindell

Photo: Stephen Maturen/Getty Images

Dominion Voting Systems on Monday sent a cease and desist letter to My Pillow CEO Mike Lindell over his spread of misinformation related to the 2020 election.

Why it matters: Trump and several of his allies have pushed false conspiracy theories about the company, leading Dominion to take legal action. It's suing pro-Trump lawyer Sidney Powell for defamation and $1.3 billion in damages, and a Dominion employee has sued Trump himself, OANN and Newsmax.

Off the Rails

Episode 5: The secret CIA plan

Photo illustration: Aïda Amer, Sarah Grillo/Axios. Photo: Zach Gibson/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 5: Trump vs. Gina — The president becomes increasingly rash and devises a plan to tamper with the nation's intelligence command.

In his final weeks in office, after losing the election to Joe Biden, President Donald Trump embarked on a vengeful exit strategy that included a hasty and ill-thought-out plan to jam up CIA Director Gina Haspel by firing her top deputy and replacing him with a protege of Republican Congressman Devin Nunes.