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Kellwood Feeling the Heat As Takeover Pressure Builds

Kellwood Co. is stuck between a fed-up Wall Street and an angry major shareholder - and it must either deliver to the first or risk a hostile takeover by...

Kellwood Co. is stuck between a fed-up Wall Street and an angry major shareholder — and it must either deliver to the first or risk a hostile takeover by the second in 2008.

Since Sun Capital Securities Group LLC issued — then reissued — a $543 million bid for the St. Louis-based vendor this fall, the second-largest Kellwood shareholder has made it clear it intends to buy the $1.6 billion company despite Kellwood’s two flat rejections of the $21 a share offer.

“Our strong preference is to acquire Kellwood in a friendly negotiated transaction,” stated a letter issued last month by Jason G. Bernzweig, vice president of Sun Capital, to the Kellwood board, “but we are prepared to take all necessary steps to protect the value of our 9.9 percent ownership position in Kellwood, including making a $21 per share offer directly to Kellwood’s other shareholders.”

Sun Capital originally made its offer on Sept. 18, and a month later, Kellwood rejected that bid.

Kellwood has stepped up its efforts to persuade investors to have faith in its strategic plan. Robert C. Skinner Jr., chairman, president and chief executive officer of Kellwood, made several promises to shareholders, including that the company would boost organic sales growth to 4 to 5 percent, raise operating margins to 9 percent and grow earnings per share at least 25 percent.

But Sun Capital followed that announcement with a reiteration of its earlier offer, insinuating it did not have faith in Kellwood’s execution record. Again, Kellwood turned down the bid.

Last quarter, Kellwood posted a loss from continuing operations of $66.3 million, which prompted a restructuring. Its third-quarter earnings will be released Friday. The stock has been trading between $14 and $19 during this period.