As Dov Charney locks horns with American Apparel Inc.’s board for control of the company, potential buyers weighing a takeover are sitting on the sidelines and, as one source put it, more intrigued than interested.
“I don’t think this is an asset that’s a need-to-have asset for anybody,” said the banker, who’s been talking to would-be buyers. “Everybody’s sitting back and waiting. I’m not sure anybody knows how this plays out. I don’t think this is over anytime soon.”
Ousted founder Charney borrowed nearly $20 million to buy 27.4 million shares of the company, boosting his stake to 43 percent. That puts the former president, chief executive officer and chairman in striking distance of retaking control of the company, but he has to rally support from other shareholders and contend with a poison pill installed to prevent a takeover.
Charney has called for a special shareholders’ meeting in September to rejigger the board and is contesting his firing at arbitration.
The company, meanwhile, is continuing its investigation into Charney, who was fired for misconduct following years of high-profile allegations of sexual harassment from former employees. He has repeatedly denied wrongdoing.
Since Charney was suspended pending termination two weeks ago, American Apparel has said it remains committed to its Made in the USA, sweatshop-free model.
That was called into question in a published report Wednesday, which said one of the company’s largest creditors, Monarch Alternative Capital, was trying to force a sale of the company and shutter the retailer’s Los Angeles factory.
Sources close to the company and to Monarch denied the report. And the source familiar with the creditor’s thinking said, “Monarch supports the Made in America strategy and has never had conversations with American Apparel or others about an outsourcing strategy.”
Another source maintained that Monarch has been working behind the scenes and pushing for the business to take more of a licensing approach.
Monarch is said to own about half of American Apparel’s debt and could eventually play a more prominent role in what happens to the company. Charney has teamed with Standard General, which lent him money to increase his stake, and might find itself squaring off with Monarch.