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Hampshire, NAF Deal a No Go

NAF said Monday it had ended its previously announced cash tender offer.

The problematic merger of Hampshire Group Ltd. and NAF Holdings II is off, and the blame game is on.

This story first appeared in the April 28, 2009 issue of WWD.  Subscribe Today.


NAF, the investment fund headed by Efrem Gerszberg that was seeking to buy Hampshire for about $30.4 million, said Monday it had ended its previously announced cash tender offer because certain conditions weren’t satisfied before the offer’s expiration at midnight on Friday. But Hampshire contended the termination was a by-product of insufficient financing on NAF’s part.

Hampshire said NAF’s letter “alleges that the basis for such attempted termination is that the company has breached its obligations under the merger agreement. We believe the allegations are, in fact, without basis. We believe that your attempt to terminate the merger agreement has occurred because [NAF and its affiliate, NAF Acquisition Corp.] do not have the financing in place necessary to consummate the tender offer and the merger on the terms agreed.”

The sweater and sportswear firm said all conditions of the tender were satisfied as more than 93 percent of the shares outstanding had been received and Hampshire had the required minimum of $37 million in cash available to proceed. It called NAF in breach of both its obligation to close on the tender offer and its representation to Hampshire a week ago that it had the required financing in place.

Hampshire said it was ending the merger agreement, and reserved its rights against NAF and its affiliate, as well as Gerszberg, president of NAF, under his personal guarantee.

Gerszberg could not be reached for comment.

NAF was to have merged into Hampshire upon completion of the deal with the combined entity going private.

Gerszberg initiated the takeover in February with an offer of $5.55 a share for common stock, which put the minimum purchase price at $30.4 million based on about 5.5 million shares outstanding. The offer to shareholders represented a roughly 200 percent premium on the stock at the time.

The April 17 deadline to close the acquisition was extended by a week after NAF found itself with two-thirds of the shares outstanding, below the 82 percent required. At the same time, the cash requirement for Hampshire was reduced to $37 million from $38 million.

Earlier this month, Hampshire said it had violated a financial covenant on a $125 million revolving credit facility with HSBC, disclosed a $29.9 million loss for fiscal 2008 and revealed its independent auditors had doubts about its future as a going concern. It also shed 75 jobs, about 24 percent of its global workforce, and implemented other budget cuts in an effort to realize $6.6 million in annualized savings.

Reacting to the news, investors sent Hampshire’s stock down $2.65, or 48.6 percent, to $2.80.

In addition to private label work for Macy’s, Nordstrom and Bloomingdale’s, Hampshire licenses the Joseph Abboud, Geoffrey Beene and Dockers brands.