Talbots rejected a $212 million buyout proposal from Sycamore in December but allowed the private equity firm to look at its books less than two months later as its business continued to deteriorate.

Following months of discussions, Sycamore raised its offer to $214.6 million in early May but Talbots announced on Friday that the talks had ended without a merger agreement, which sent its shares plunging 41 percent.

"While a successful turnaround has thus far eluded Talbots, we think it will have a better chance of success as a private company away from the scrutiny and demands of public investors," Jefferies analyst Randal Konik said in a client note.

The retailer, which built its reputation on traditional pearls-and-classics fashions, has seen its sales fall for five straight years as shoppers flocked to Ann Inc. — owner of Ann Taylor and Loft stores — and Chico's FAS Inc.

Talbots' efforts to reach out to younger shoppers also failed and alienated its core shoppers, women over the age of 35.

The company tried to convince Wall Street by cutting jobs and announcing that it would look for a new CEO, but the business had declined so sharply that some even questioned if the retailer would have enough cash to operate beyond the next 12 months.

"The company has been on a long and difficult journey over the past several years as it struggled to regain relevance with its customer base," Konik said.

The company said on Thursday that the deal with Sycamore was valued at about $369 million, including debt.

Sycamore, which is Talbots' second-largest shareholder, will pay $2.75 per share, representing a premium of 113 percent to the stock's close on Wednesday.

Talbots' shares rose to $2.58 before the bell. The stock was trading in the mid-20s, before sales began sliding five years ago.

Sycamore was founded last year by retail industry veteran Stefan Kaluzny, a former retail specialist at the well-known PE firm Golden Gate Capital.

Kaluzny, who serves as a director at retailers such as Zale Corp., Apogee Retail and Eddie Bauer, had earlier worked with Talbots when Golden Gate bought the retailer's J. Jill division in 2009.