The heat on Kellwood Co. is expected to intensify.
Following the $1.96 billion company's rejection Wednesday of a $543 million bid by Sun Capital Securities Group LLC, analysts and consultants said the firm now has to prove to shareholders that it can turn around its operations and boost its lagging share price — and do it fast.
The St. Louis-based company said in a statement Wednesday that Sun Capital's $21 a share bid "significantly undervalues the strength of Kellwood's expanded portfolio of brands and the company's opportunities for sales and earnings growth," according to a statement issued Wednesday morning. Further, the bid "is not in the best long-term interests of Kellwood and its shareholders...taking into account the potential benefits that may be realized through the company's previously announced long-term strategic plan."
Kellwood is in the first year of its five-year strategic plan, and industry sources predict it will take the group at least two years to organically raise its stock price anywhere close to the $21 offer. Kellwood's shares closed Wednesday down 34 cents to $17.33.
"Our board is committed to enhancing shareholder value, and the Sun Capital proposal is not consistent with this objective," Robert C. Skinner Jr., chairman, president and chief executive officer of Kellwood, said in a statement. "We continue to believe that executing our corporate strategy to reinvigorate our core business, expand our penetration into higher profile, better and above price point brands, connect more directly with consumers and utilize our operating infrastructure more efficiently to fund our growth will deliver greater value to our shareholders. Our board is determined to enable all of its shareholders to participate in these future benefits resulting from the company's sales and earnings growth strategy."
Skinner was unavailable Wednesday for further comment, and officials at Sun Capital declined comment.
"Kellwood doesn't have any alternative but to pursue its stated course," said consultant Paul Charron, former chairman and ceo of Kellwood rival Liz Claiborne Inc. "The next move, if there is one, is someone else's.
"I would have been flabbergasted if the board took that offer," Charron continued. "It was a low-ball bid at a point in time when the stock was depressed. The stock picked up a few dollars and is now tracking in a range with the other companies in the category."
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