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Kenneth Cole Board OKs Buyout Offer

Shareholders will receive $15.25 a share in cash as the founder takes the company private.

Kenneth Cole Productions Inc. said Wednesday its board has approved the offer from the company’s founder to acquire the firm for $15.25 a share in cash, with an implied enterprise value of $245 million.

This story first appeared in the June 7, 2012 issue of WWD.  Subscribe Today.

Although the board has approved the merger, completion of the transaction still requires approval of the shareholders and is subject to certain closing conditions. The deal the board agreed to is slightly better than the offer of $15 a share first proposed in February.

The merger agreement that was inked allows Kenneth D. Cole, chairman, chief creative officer and beneficial owner of 46 percent of the firm’s outstanding common stock, to acquire the company through KCP Holdco Inc., an entity formed for the acquisition. The 46 percent ownership stake represents control of 89 percent of the voting power.

Under the terms of the agreement, Kenneth Cole shareholders, excluding the company’s founder and his affiliated entities, to receive $15.25 a share in cash. The company said the price represents a premium of 17 percent to the closing price of the firm’s shares on Feb. 23, the last trading day before the announcement by Cole of his proposal to acquire the shares he doesn’t yet own. The company said the share price is also a premium of 28 percent over the average closing price of the firm’s Class A common stock for the 45 trading days prior to Feb. 23, with an implied value of $245 million for the total enterprise.

The company had a market capitalization of about $850 million during its high in 2000.

Shares of Kenneth Cole Productions rose 3.6 percent, or 52 cents, to close at $15.06 in trading Wednesday on the New York Stock Exchange.

The board said it formed a special committee in February to evaluate the proposal, consider alternatives, and that it concluded that the proposed transaction was in the “best interests” of shareholders other than Cole and his affiliates and associates.

BofA Merrill Lynch was financial advisor to the special committee, while Sidley Austin was its legal advisor.

Peter J. Solomon Co. was financial advisor to Cole, while Willkie Farr & Gallagher was his legal advisor.