By  on December 16, 2008

Adrenalina rescinded its offer to buy Pacific Sunwear of California Inc. on Monday but said it will continue to seek a merger, leading the larger PacSun to publicly rebuff the upstart extreme sports retailer.

Adrenalina chairman and chief executive officer Ilia Lekach said his company was withdrawing its offer due to the weakening of PacSun’s stock price.

“However, neither PacSun’s precipitous stock decline and disappointing third-quarter financial results, nor the board’s refusal to meet with us has changed our belief in the strategic and financial merits of a combined company,” Lekach wrote in a letter to PacSun chairman and ceo Sally Frame Kasaks and the company’s board dated Nov. 20 and released Monday. On Oct. 20, the Miami-based retailer offered to buy PacSun for $4.50 a share, valuing the company at about $300 million. On Oct. 29, it increased its bid to $5 a share, or about $329 million. PacSun rejected both offers from its smaller competitor. Shares of PacSun fell 8 percent in trading Monday to close at $1.60. On Oct. 20, they closed at $3.80.

Lekach said his company is now a PacSun shareholder and “intends to significantly increase its position in the near term.” He added that his company has been in talks with some of PacSun’s largest stock owners.

In a letter to Lekach written on behalf of PacSun’s board, Kasaks said, “Your continuing pursuit of a business combination with Pacific Sunwear serves only to distract management and Pacific Sunwear’s employees.

Kasaks pointed out that Adrenalina reported losses of $5.8 million in 2007 and $6.2 million for the first nine months of this year, and invited shareholders to assess Adrenalina’s public filings for themselves.

An Adrenalina spokeswoman said it would be inappropriate for the company to discuss its strategy at this point and did not say how large the company’s stake in PacSun is. After the earlier offers, Adrenalina said it had identified partners, individuals and institutional investors to help finance the buyout.

Adrenalina operates three stores in Florida and has stores under construction in Colorado, Georgia and Texas. Anaheim, Calif.-based PacSun has 942 stores.

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