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Kellwood Allows Shareholders to Decide on Sun

The board of directors of Kellwood Co. has elected to step aside and let shareholders decide on whether they want the apparel firm to be acquired by Sun...

The board of directors of Kellwood Co. has elected to step aside and let shareholders decide on whether they want the apparel firm to be acquired by Sun Capital Securities Group LLC for $21 a share, or about $762 million.

The board had twice rejected Sun Capital’s bid.

The private equity company launched a tender offer on Jan. 16. The offer did not have any conditions, such as financing.

Previously, Sun’s offer to acquire Kellwood had been merely proposals. The tender offer launched this month, if accepted by a majority of Kellwood shareholders, would obligate Sun to close on its acquisition of the St. Louis-based apparel firm on Feb. 12.

Kellwood said that before the expiration of Sun’s tender offer on Feb. 12, it intends to rescind its own $60 million debt tender offer for the 7.875 percent notes due on 2009. Sun Capital had said the offer was ill advised and reduces equity value. Kellwood made the bond tender offer a week after unveiling a plan to buy back $80 million in stock following completion of the sale of Smart Shirts, which netted the company $162 million in cash.

The Kellwood board also said it was not taking any position on whether stockholders should tender their shares into the offer.

Sun’s financial advisors are Citibank and Credit Suisse. Kellwood’s bankers are Bank of America and Morgan Stanley.

A source familiar with the situation said the expectation is that Kellwood will find a so-called white knight within the next three weeks. The same source said there have been expressions of interest, but declined to disclose whether they were from strategic or other financial buyers.

Robert C. Skinner Jr., chairman, president and chief executive officer of Kellwood, said, “While it is our strong preference to continue as an independent company, we believe that stockholders should be able to make their own decisions on a $21 per share cash offer that is not subject to due diligence or financing.”