The Clinton Group Inc. has moved forward in its effort to reconstitute the board of The Wet Seal Inc. and boosted its stake in the troubled specialty retailer.
In a filing with the Securities and Exchange Commission, the activist investor group sought comment and approval from the SEC in its effort to obtain shareholder support to unseat four incumbent directors, including chairman Harold Kahn, and fill the board vacancy created by the termination last month of Susan McGalla as the company's chief executive officer.
The proposed directors are Raphael Benaroya, founder of United Retail Group Inc.; Mindy Meads and Dorrit Bern, the former ceo's of Aéropostale Inc. and Charming Shoppes Inc., respectively; Lynda Davey, chairman and ceo of investment banking firm Avalon Group Ltd., and John Mills, retail consultant. Under the Clinton proposal, Kenneth Reiss would be the only incumbent director to remain on the board. RELATED STORY: Solicitations Planned for Wet Seal Board >>
Clinton is seeking to boost shareholder value through any number of strategic alternatives, including a possible sale. When Clinton last week said it would solicit shareholder support for an alternative board, Joseph DePerio, senior portfolio manager, said, "More of the same is simply not an option."
Gregory Taxin, managing director of Clinton Group, told WWD that, pending SEC approval, it expects that it would be ready to mail solicitations to its fellow Wet Seal shareholders in about two weeks.
"The directors we're proposing have no affiliation with us and we're not proposing them to do our bidding," he said. "We know that we don't have the expertise needed to operate a specialty retailer and we're looking for a fresh, experienced board that can make solid decisions, the right people to create shareholder value."
The SEC filing noted, "Our nominees are independent of us. None of them has any existing prior ties, financial or otherwise, to Clinton or any of its affiliated funds. Please note that we are not nominating any representative of our firm and we do not expect to have any more influence with our nominees than any other stockholder."
In a separate SEC filing, Clinton said that it had boosted its holdings in the retailer to 6.6 percent including 0.1 percent held by Benaroya and Bern. Recent purchases have pushed the firm's holdings above the 5 percent threshold that necessitates SEC notification when shares are sold or bought. However, Taxin said that the purchases were made to increase Clinton's voting power.
Shares rose 4 cents, or 1.3 percent, to $2.84 in midday trading Thursday. Clinton has pointed out that the stock had lost 40 percent of its value in the past year and 80 percent of its value in the last 10 years.
Wet Seal, which earlier this month reported a $12.4 million loss in its second quarter, Thursday said its August same-store sales declined 18.3 percent, the only negative result among the stores disclosing results for the month.
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