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."
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews