NEW YORK — The possibility of a bidding war for Kasper ASL between Kellwood Co. and Jones Apparel Group moved a bit closer to reality Friday.

Kellwood on Friday received Manhattan bankruptcy court approval of its request for a $4 million breakup fee as the stalking-horse bidder for Kasper ASL.

Hedge fund Triage Management turned what was a routine request into a two-hour hearing, taking issue with the amount of the breakup fee — saying it would “chill” other potential bidders from stepping up to the plate — and alleging that the bidding procedures also prohibited alternative plans.

Marc Cooper, of the investment banking firm Peter J. Solomon, who advised Kasper, told the court that a typical breakup fee is between 3 percent and 5 percent of the bid. He noted that Kellwood’s request is just 2.5 percent of its $163 million bid for Kasper, which includes the Anne Klein designer brand.

Cooper said there were three strategic bidders, but only Kellwood was willing to sign on the dotted line and keep its bid open for several months until the acquisition process could work its way through the bankruptcy court system. He also told Manhattan Bankruptcy Court Judge Allan Gropper that he didn’t think the 2.5 percent fee would chill the bidding process. “Potential bidders don’t care where the proceeds go. What they care about is the total purchase price,” he said, adding that he “believes there will be additional bidders” at the court-mandated auction. In the end, the judge determined that the $4 million fee request was reasonable, and an auction is scheduled tentatively for Aug. 1.

In other news, Kellwood’s latest 10Q filing stated thatthe employment contract of its chairman and chief executive officer, Hal J. Upbin,was extended until Jan. 31, 2006. The extension was provided in order to accommodate succession planning for the company, the 10Q read. A company spokeswoman confirmed Friday that Kellwood has been interviewing candidates for the presidency, with the goal of naming a president by January.

“We have not identified who that person will be, and once the new president is selected, then Hal will relinquish the president title,” she said. “Then, after that person has been with the company for a transitionary period and when the board deems that individual is ready to take on the responsibility of ceo, Hal will relinquish the position of ceo.”The spokeswoman said it’s possible the new president could take on the additional ceo title in 2004, but that is not definite. She stressed that Upbin will remain active focusing on the strategy and vision of the company, while the new president will focus on the day-to-day operations of running the business.

Meanwhile,don’t expect Triage Management, which holds a chunk of Kasper’s equity, to go away. A competing hedge fund manager told WWD that Triage will likely keep close tabs on the bidding process because it believes Kasper can garner a better return on its investment than the one available through the Kellwood offer.

Outside the courtroom, some lawyers and financial dealmakers involved in the Kasper/Kellwood deal pooh-poohed the possibility of Triage’s dream becoming a reality. For that to happen, at least another $40 million would have to be coughed up by some third party, taking the purchase price to a $200 million-plus level in order for there to be sufficient funds to distribute to equity shareholders.

“There is no one who would be willing to pay that much for this company,” said one source familiar with the bidding process.

Although not identified in court, Jones Apparel Group is believed to be one of the strategic bidders for Kasper, and one investment banker identified Liz Claiborne and Hong Kong-based Dickson Poon as two others. Another investment banker who has worked with both firms said he didn’t think Kasper would add any value to Liz’s holdings and didn’t think Poon would pursue the matter any further since he tends to “buy cheap or not at all. He won’t pay up.”

Calls to Claiborne and Poon’s U.S. firm, Dickson North America, seeking comment weren’t returned.

So far, that leaves the battle for Kasper largely a two-horse race between Jones and Kellwood. Jones is expected to make at bid at the auction, but will have to pony up a minimum of $5 million to cover the breakup fee and the $1 million incremental bid to top Kellwood’s offer. Additional bidding is in $1 million increments, according to the established bidding procedures.

How determined is Jones to land Kasper now that it has lost the Calvin Klein women’s sportswear license to Kellwood after giving back the Lauren by Ralph Lauren license to Polo Ralph Lauren? Even with its plans for a new Jones sportswear line, the women’s moderate apparel giant, to be sure, needs to make up lost volume.However, Kellwood’s interest in Kasper isn’t to be underestimated. Gilbert Harrison of Financo Inc., the investment banking firm advising Kellwood, declined comment on how much more Kellwood might be willing to pay for the acquisition.

He did note, however, that “Kellwood believes that Kasper and Anne Klein are important additions to their business and it is prepared to do what is necessary to ensure the acquisition of Kasper ASL.”

Harrison stated that Kellwood’s Upbin “is totally focused on the direction of the company, and is clearly committed to not only building the Calvin Klein sportswear line and developing the XOXO line, but also to acquiring and building Kasper and Anne Klein. This fits totally with his strategy. The company has the financial resources to do this as well as other deals.”

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