Private equity firm Sun Capital Securities Group urged the board of Kellwood Co. on Thursday to immediately terminate the $1.6 billion apparel firm's debt tender offer. The board refused the request.
Kellwood on Wednesday issued a tender offer to buy back from bondholders as much as $60 million of 7.875 percent notes due next year. Holders who tender before 5 p.m. on Jan. 23 will receive the total consideration of $1,035 per $1,000 in principal of the notes tendered. Holders who tender after that, but by midnight of Feb. 6, will not receive the early tender premium and instead will get $1,005 for every $1,000 in principal. The move followed an $80 million stock repurchase last week.
Sun Capital is the second-largest Kellwood shareholder, with an ownership interest of about 9.9 percent. The firm has tried twice to acquire Kellwood, has been rebuffed both times, but shows no signs of giving up efforts to take over the vendor. The Boca Raton, Fla.-based private equity firm made its first $543.9 million, unsolicited buyout bid in October, and then repeated the offer a month later.
The letter, written by Sun Capital vice president Jason G. Bernzweig, described the tender offer as "ill-advised" and "value-destructive." The private equity firm said the bond tender, if completed, "would be destructive to equity value and would represent a direct transfer of value from your shareholders to bondholders."
Kellwood, as in previous exchanges with Sun Capital, dismissed the request. "The board believes that buying back stock and maintaining an appropriate capital structure delivers significant value to our shareholders," the company said in a regulatory filing with the Securities and Exchange Commission. "The board, the company and its independent advisers have carefully evaluated the best uses for its cash and Kellwood is confident that its plans will advance shareholder value."
Kellwood didn't address Sun Capital's point about the early premium tender. Instead, the St. Louis-based company reiterated its long-term financial plans: the $162 million sale of Smart Shirts to repurchase shares and reduce debt; the $80 million accelerated share repurchase agreement over the next nine months of about 18 percent of Kellwood's total outstanding stock at the current share price, and the cash tender offer. The company also said that its "revolving credit facility has sufficient capacity to fund the company's ongoing growth plans at a lower cost than the debt to be repurchased."Sun Capital said in its letter that "paying a premium to repurchase these notes at this time, when it would be clearly beneficial to hold the notes to maturity and repay them at par, is at odds with the fiduciary obligation of the board and management to maximize shareholder value."
Sun Capital reasoned that, if the board has genuine confidence in management's business plan, then the "right strategy for maximizing shareholder value would be to leave the notes outstanding at this time; distribute the cash proceeds to shareholders, either in a special dividend or via a share repurchase, and then refinance the notes in 18 months upon maturity at par."
The private equity firm added that, if the board has concerns about management's business plan, then the "right approach would be to negotiate with Sun Capital or run a sale process where potential buyers would have the ability to assume the notes. In either circumstance, the bond tender is not in the interest of Kellwood shareholders."
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty