Wall Street boosted Kellwood Co.'s stock 18.7 percent Monday as analysts praised the St. Louis-based vendor's decision to halt efforts to block Sun Capital Securities Group LLC's $21 a share tender offer.
Kellwood stock gained $3.20 to $20.30 in New York Stock Exchange trading.
Sources said several factors drove Kellwood's change of heart from rejecting the $762 million bid: the firmness of Sun's offer, which is not subject to financing or due diligence; Sun's threat of a proxy contest if Kellwood continued to block the bid, and communication from shareholders.
Lazard Capital Markets LLC said the decision by Kellwood's board, including the removal of a poison pill preventing a single entity from owning more than 20 percent of the company, was an "about-face...in a more constructive direction."
"This leads the way for an acquisition by Sun Capital to be completed on Feb. 12, although Kellwood reserves the right to retain its shark repellent if it believes it can solicit a higher offer," according to a Lazard report.
Lazard pegged the chance of finding a higher offer at less than 25 percent, but acknowledged that Kellwood would seek alternative bids in the next two weeks, including calling back potential acquirers that have contacted Kellwood in the last six months.
"While Sun Capital's offer, under normal conditions, would be considered shrewd and opportunistic, it seems much more reasonable in today's environment," Lazard said in its report. "Shareholders would do well, in our view, to accept Sun's offer."
In addition to letting shareholders decide whether to tender their stock, Kellwood initially rescinded its own $60 million debt tender offer over the weekend, then Monday announced instead that it would extend the deadline for the offer until Feb. 13, the day after Sun's deadline, so the debt tender offer could still stand if Sun's tender offer does not receive support from the majority of shareholders. Sun had threatened to reduce its offer to $19.50 if Kellwood did not withdraw the bond tender offer made earlier this month.
Brad Stephens, a retail analyst for Morgan Keegan & Co. Inc., predicted the deal will go through. "If I were a Kellwood shareholder, I would take the $21 and run," Stephens said. "It's seven times EBITDA for a company with a history of troubles restructuring, and there's companies like PVH and Warnaco that are trading at six times or less of EBITDA."
Although CtW Investment Group, which represents an estimated six million union members who own about 198,000 shares of Kellwood common stock, or less than 1 percent, said it will not recommend that its shareholders tender at $21, it is supportive of Kellwood's decision to start negotiations with Sun and solicit other offers.
"The Kellwood board seems to have finally gotten religion," said Michael Garland, a director at CtW Investment Group. "Most significantly, the board rescinded the bond tender...which is what should have happened long ago if they are going to extract maximum value for shareholders."
Jason Bernzweig, vice president of Sun Capital, issued a statement praising the Kellwood board's decision.
Sun Capital made two proposals this fall to buy Kellwood for $21 a share, and Kellwood immediately rejected both. This month, Sun Capital took the bid to the next level, making a tender offer to shareholders of the same amount. Kellwood had initially told its stockholders to hold off on selling until it could review the offer, and this weekend still said it was not taking a position on whether stockholders should tender their shares.
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)