NEW YORK — The race to acquire Kasper A.S.L. and its signature suit and Anne Klein franchises appears to be coming down to two leading candidates: Jones Apparel Group and Kellwood Co., which are expected to face off in a bankruptcy court-organized auction on Thursday.

A committee of Kasper’s creditors met on Friday to consider the initial round of bids that have followed Kellwood’s offer of more than $163 million on June 12. Jones was believed to have placed a higher bid, although the exact amount could not be determined. Kasper was expected to issue a release Friday night after press time.

Jones would have had to have bid at least $168 million under court procedures to cover a breakup fee of Kellwood’s deal and meet the minimum incremental bid of $1 million. Jones officials did not return calls and a Kasper spokeswoman declined to comment.

Although Jones was seen as the leading candidate for the $358 million company in the spring, Kellwood became the stalking horse in the auction when it offered $111 million in cash, $40 million in Kellwood common stock, the assumption of prepaid royalties projected to be $12.6 million at closing, and certain other liabilities, totaling $163.6 million.

Kasper has been exploring various strategic options, with Peter J. Solomon Co. as a financial adviser, as part of its plan to emerge from bankruptcy protection, including an earlier management-led takeover offer beginning last December for $88 million that was subsequently increased to $100 million, orchestrated by Kasper chief executive officer John Idol. There was a possibility that management would increase its bid to compete with Jones and Kellwood during the auction, but raising the necessary commitments against the well-financed apparel giants appeared to be a difficult maneuver in the current economic climate.

Jones recently obtained a $700 million, three-year revolving bank credit facility that extends to June 10, 2006. Combined with the company’s existing $700 million revolving credit facility, which lasts until June 15, 2004, Jones now has $1.4 billion of committed bank credit. While Kellwood’s interest is significant, Jones’ resources at hand would indicate the company has greater leverage in completing a deal.

In the company’s second-quarter earnings report this week, ceo Peter Boneparth confirmed Jones’ interest in the company and said: “We have decided to enter the auction process for Kasper A.S.L. Ltd., which will shortly be emerging from Chapter 11 bankruptcy proceedings. We see numerous strategic advantages to acquiring Kasper. Its portfolio of brands, which include Kasper and Anne Klein, can be excellent additions to our existing branded portfolio. This potential acquisition would be a good fit within all our product segments and offers product growth opportunities and cost synergies.”Jones’ purchasing muscle and the company’s interest in the deal that was obvious despite Boneparth’s earlier silence on the subject, was also likely a factor in the relative scarcity of competing bids. Sources inside Kasper added that only executives from Jones and Kellwood had been through its offices in recent weeks to perform due diligence research on the company.

Regardless of which company is victorious in the auction, Idol is expected to resign from the company following its sale.

As reported, Kellwood’s agreement calls for a change of Kasper management. Idol, who said he would resign if Kellwood’s bid succeeds, would be replaced by Gregg I. Marks, currently president of Kasper, and Joseph B. Parsons, currently chief financial officer, would be promoted to president and chief operating officer. Meanwhile, Idol’s compensation package, as detailed in a filing with the Securities and Exchange Commission, includes a payout to him of about $11 million, roughly the same amount he received in a settlement with LVMH Moët Hennessy Louis Vuitton last year, following his departure from Donna Karan International in 2001.

He has not specifically declared whether he would leave if Jones acquires the company, although several companies have pursued talks with the turnaround specialist about other lucrative positions, such as the ceo openings at Tommy Hilfiger Inc. or Michael Kors LLC.

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