Charlotte Russe Holding Corp. shareholder B. Riley & Co. threatened on Tuesday to force a proxy fight with the junior retailer if it doesn’t pursue a takeover bid that was rejected last month.
In a letter to the Charlotte Russe board, B. Riley also called recent management changes, including the hiring of former Mervyns chief executive officer John Goodman as ceo, “a debacle” and characterized recent merchandising decisions as “misguided.”
In rejecting the bid by KarpReilly Capital Partners LP and H.I.G. Capital LLC, the San Diego-based retailer said it was an “opportunistic proposal” that was coming in the early stages of the company’s “transformation” amid “unprecedented general macroeconomic turmoil.”
Karp and H.I.G.’s move to acquire and take Charlotte Russe private valued the company at between $188.1 million and $198.6 million, or $9 to $9.50 a share, which represented a 31 to 38 percent premium over its closing stock price the day before the offer. On Tuesday, shares closed at $6.16, down 36 cents or 5.5 percent, which would elevate the premium to between 46 and 54 percent.
But B. Riley said in its letter that it found Charlotte Russe’s decision “extremely difficult to rationalize” and asked the retailer to explain why it nixed negotiations with Karp, a company that has a 5.4 percent stake in the retailer. B. Riley said it would monitor Charlotte Russe’s actions and “review all of our available options, including nominating a slate of directors.”
B. Riley’s stake in Charlotte Russe wasn’t disclosed. Charlotte Russe didn’t return calls seeking comment.
“We are deeply troubled by the recent actions taken by directors and members of management,” B. Riley chairman Bryant Riley said in the letter, “including the corporate governance missteps and strategic and operational direction of the company.”
Some concerns raised by the investment firm involved the “seemingly forced” retirement of former ceo Mark Hoffman and the company’s implementation of a shareholder rights, or poison pill, plan that makes a hostile takeover more difficult for the buyer. In August, the specialty retailer emphasized that the introduction of a poison pill provision was not in response to a specific proposal.
KarpReilly pursued an acquisition of Charlotte Russe in 2007. Allan Karp, a partner at KarpReilly, served as a director of the retailer for 11 years and was a principal of SKM Investment Fund, an original Charlotte Russe investor that sold its stake in September 2006.
Charlotte Russe’s new management — which includes Goodman as well as former Guess Inc. chief financial officer Fred Silny as cfo and chief merchandising officer Emilia Fabricant, former chief merchant of babystyle and president of recently bankrupt eStyle Inc. — lacks “meaningful junior fast-fashion experience,” according to B. Riley. Goodman was ceo of Mervyns when it filed Chapter 11 in July and opted to liquidate in October.
The company added that Charlotte Russe’s turnaround strategy, which will include higher-priced merchandise, is “misguided” and “speculative at best.”
“We believe that embarking on a new, higher price point strategy at a time when consumers are growing increasingly frugal is illogical and devoid of economic sense,” B. Riley said.
Supermodel @helenachristensen teamed up with longtime friend and designer @camillastaerk on a joint @paredeyewear collaboration. The lineup features three styles and 11 offerings, all of which embody a vintage feel. Get all the details on how they celebrated the collab on WWD.com. #wwdaccessories #wwdeye (📷: @slovekinpics)
“It’s a hard industry to keep motivated, as well, so finding different subjects and people is what makes it worth it – when you’re like, oh, I’ve met great people, I feel like I’ve done something good, and I feel proud of having done this,” said French actress Stacy Martin on being grateful for the variety of roles she’s take on. Read @ktauer’s full interview with Martin on her her latest film “Godard Mon Amour.” #wwdeye (📷: @danieldorsa)
After showing in front of the Eiffel Tower for his last two women’s ready-to-wear collection, it looks like @anthonyvaccarello may be heading to the Big Apple. Sources say the designer will stage his next @ysl show in NYC on June 6. Get all the details on WWD.com. #wwdnews #wwdfashion (📷: @aitorrosasphoto)
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion