By JOAN E. SOLSMAN
Talbots Inc. announced plans to shed its Asian majority owner through a merger with a special-purpose acquisition vehicle, as the women’s apparel retailer also said it swung to a profit in its fiscal third quarter.

Under the merger agreement with BPW Acquisition Corp., Talbots intends to buy back the 54% stake that Aeon Co. of Japan holds in the retailer.

BPW shares will be exchanged for $11.25 each in Talbot’s stock, a 14% premium to Monday’s closing price. BPW’s cash-in-trust of nearly $350 million, as well as a new $200 million credit line that Talbots received, will be used to fund the repurchase from Aeon.

Meanwhile, Talbots projected a fourth-quarter loss from continuing operations of six cents a share to 14 cents a share.

Chief Executive Trudy Sullivan said “the efforts over the past several quarters—particularly in the areas of strengthening our merchandise offering and tightly managing inventory and expense—have created a much stronger, leaner and profitable organization.”

Women’s apparel sellers have been among the hardest hit in the recession, and Talbots, which sells traditionally styled clothes to women ages 25 and older, was sputtering even before the slowdown set in. Ms. Sullivan, hired in 2007, instituted more frequent style changes and new-product introductions, but as the downturn deepened, Talbots has cut jobs and sold off the J. Jill brand just three years after it acquired it.

Talbots, based in Hingham, Mass., reported a profit of $14.6 million, or 26 cents a share, for the quarter ended Oct. 31, compared with a loss of $170.8 million, or $3.19 a share, a year earlier. Excluding restructuring and write-downs, adjusted profit from continuing operations was 31 cents a share, compared with a loss of 23 cents a share a year earlier.

Revenue fell 14% to $308.9 million as sales at stores open at least a year declined 16%.

In September, Talbots forecast an adjusted loss from continuing operations of 24 cents a share to 30 cents a share. It expected a sales decline of 14% to 17%.

Gross margin rose to 39.9% from 31.6%. Inventory declined 29% on a square-foot basis.

Write to Joan E. Solsman at joan.solsman@dowjones.com

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