Woes continue for American Apparel as take-over proposition is insight. The LA based clothing brand is tight lipped on the prospective buyer. However, last week Wall Street Journal and Bloomberg News had reported that a private equity firm, Irving Place Capital has made an offer of $1.30 to $1.40 per share.
Five days later when Dov Charney was let go from the company he established, the above mentioned buyout offer was made, this news coupled with the appointment of a new CEO, Paula Schneider a renowned retail executive who takes the reigns of the clothing brand by the beginning of January 2015, has resulted in a surge in share prices early last week by almost 8% to take the shares at $1.16 per share.
In the midst of the take-over bid American Apparel (NYSEMKT:APP) is reported to set in a “poison pill”, shareholders right plan to deter an inimical buyout. American Apparel tries a “flip in” strategy by offering rights issue to existing shareholders. This move is expected to dilute holdings and make the takeover more expensive. It is worth observing that Dov Charney the founder had recently upped his holdings to 43% in June. An increased holding by Charney suggests that the troubled founder and CEO looks to make a comeback in some capacity although the voting rights are shared by a New York based hedge fund, Standard General. The hedge fund is reported to have loaned funds to facilitate Charney to boost his shareholdings from a mere 27% to 43%.
Amongst other developments Collen Brown replaced co-chairs David Danziger and Allan Mayer, Collen Brown has been on the board since August. Danziger and Mayer still serve on the board.
Paula Schneider who has filled the vacancy of the CEO has previously worked in a number of retail companies like Warnaco Group and BCBG Max Azria.
American Apparel the company which has been under a lot of criticism and speculation after the scandalized removal of ex-CEO Dov Charney, has been under a lot of pressure by investors and shareholders. The company has also been facing a decline in shares and in the ruins that the company has been lately, the idea of a takeover by another company has come to Apparel at the right time. The fact that the company has managed to fire the sole founder of the company has attracted many negative remarks on the company’s activities and has overall created a bad image in the industry.
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