Ending threats of a proxy battle, Pacific Sunwear of California Inc. said Friday Adrenalina Inc. had withdrawn its nominees for election to PacSun’s board.
This story first appeared in the April 6, 2009 issue of WWD. Subscribe Today.
The bitter David-and-Goliath dispute began last October when PacSun, with 932 stores, rejected the bid by Adrenalina, which has four stores, to buy the teen retailer — first for about $300 million and later for about $329 million.
The conflict intensified in February after Adrenalina chairman and chief executive officer Ilia Lekach named four candidates, including a professional poker player and gaming expert, to stand for election to the PacSun board. Lekach also demanded the resignation of PacSun ceo Sally Frame Kasaks, saying her leadership “threatened to destroy shareholder value” and imperiled the existence of the Anaheim, Calif.-based teen retailer.
PacSun’s board backed Kasaks and her efforts to turn around the company, warning Lekach in a letter that it would do “all that is necessary to protect shareholders.”
PacSun’s sales last year totaled $1.25 billion, and Adrenalina’s nine-month total was $3.7 million.
Lekach’s recent change of heart came after he met with several of PacSun’s directors.
“What changed was that I met with the independent board members, and they showed me what they were doing,” Lekach told WWD. “They chose a direction.”
Lekach said he would be “interfering” in PacSun’s plans if he pursued the proxy battle, but added the threat of a confrontation “could have been avoided” if the retailer granted him a meeting earlier.
“But it’s always in hindsight,” he said. “All’s well that ends well.”
PacSun’s lead independent director Peter Starrett agreed.
“We appreciated the opportunity to have an open and frank discussion with Mr. Lekach, and to hear his ideas and suggestions,” he said. “We are pleased that Adrenalina has determined not to pursue a proxy contest so that the company can devote all of its resources and attention to the important task of operating its business.”
PacSun shares fell 2 cents to $1.67 on Friday, and Adrenalina stock gained 7 cents, to close at 15 cents.