NEW YORK CITY—Women's fashion shop ascena Retail Group hopes to bring the Ann Taylor and Loft brands into its fold in a deal worth $2 billion, based on the valuation of the stores' parent company, Ann Inc. As of now, ascena includes retail chains Justice, Lane Bryant and other women's clothing stores. The merger will result in ascena overseeing 4,900 retail stores catering to women's clothes and accessories.

Ascena intends to meet the purchase price—which was initially reported by Bloomberg—through a combination of cash and stock. Stockholders will receive $37.34 in cash and 0.68 of a share of ascena common stock in exchange for each share of ANN common stock, giving ANN stockholders control of approximately 16% of ascena.

“This transaction joins two strong and highly complementary organizations and management teams and dramatically reinforces our leadership position in women's specialty apparel retailing,” stated David Jaffe, ascena's president and CEO. “With the addition of the Ann Taylor and LOFT brands, ascena will become one of North America's largest and most diversified specialty apparel retailers, with a tremendous set of opportunities to continue to expand its leadership position in the women's apparel market,”

The board of directors of both companies have unanimously approved the deal. It's expected to close in the second half of 2015, subject to customary conditions and approvals.

Over the next three years, ascena has identified $150 million in annualized run rate synergies through the combination. The merger has the potential to be very beneficial for ANN as well, since in the past few years the brands have struggled to stay relevant and ahead of trends. Bloomberg reported that revenue growth in ANN's most recent fiscal year slowed to 1.6 percent, and net income tumbled 34% to $68 million.

“Based on our Board's thorough and wide-ranging review process, we are confident that this agreement with ascena is in the best interests of ANN Inc.'s stockholders,” said Ronald Hovsepian, non-executive chairman of ANN's board. ANN stockholders, he elaborated, will receive approximately 80% of the purchase price in cash while having the opportunity to participate in the upside of the combined company through the stock portion of the purchase price.

Ascena plans to finance the purchase through bank debt, with commitments from Goldman, Sachs & Co. and Guggenheim Securities—which acted as financial advisors to ascena—already in hand. Proskauer Rose LLP was ascena's legal counsel. J.P. Morgan Securities LLC was the exclusive financial advisor and Wachtell, Lipton, Rosen & Katz provided legal advice to ANN though the strategic review process and the transaction.