Swank Inc.’s second suitor has dropped out of the running for the men’s accessories company, removing a possible hurdle to the firm’s acquisition by Randa Accessories Leather Goods LLC.
Pending approval of its shareholders and regulatory requirements, Swank agreed on Feb. 3 to be acquired and taken private by Randa, its major competitor in the men’s accessories market, for $10 a share, or about $57.5 million, which represented a 111 percent premium over the closing bid price of $4.75 on Feb. 2. A second bidder came forward during the 35-day “go-shop” period after Financo Inc., Swank’s financial adviser, contacted 28 potential strategic acquirers and 48 interested parties in the financial sector. Determining that the new bidder was “reasonably likely” to produce a superior proposal, Swank continued discussions with the unnamed party without changing its board’s recommendation to proceed with the Randa deal.
The Randa-Swank combination is expected to close during the second quarter of the year. Randa expects to fund the acquisition through cash and a new revolving credit facility from JPMorgan Chase Bank.
The identity of the second bidder wasn’t disclosed by Swank. Financial and market sources suggested that because of the efficiencies to be gleaned through a strategic combination, a higher offer from a financial bidder wasn’t likely to succeed. Furthermore, Swank would have been required to pay a termination, or breakup, fee of $1.72 million to Randa if it agreed to be acquired by another bidder deemed to be an “excluded party”— one coming forward during the “go-shop” period — based on the merger agreement between the two firms. The breakup fee would rise to $2 million if a second bidder didn’t qualify as excluded or the merger arrangements were terminated for other reasons, according to papers filed with the Securities and Exchange Commission.
Last year, Swank’s net income rose 42.3 percent, to $5.9 million, or $1.06 a diluted share, as sales were up 4.5 percent to $138.6 million. In its annual report, filed with the SEC on Friday, it identified its three biggest customers as Macy’s Inc., Kohl’s Corp. and The TJX Companies Inc., accounting for 18, 14 and 10 percent of net sales, respectively. It reported licensing arrangements covering brands including Geoffrey Beene, Nautica, Tommy Hilfiger, Kenneth Cole, Guess, Tumi, Chaps, Donald Trump, Buffalo David Bitton, Pierre Cardin and U.S. Polo Assn. All brands listed license Swank for men’s leather accessories and most for men’s costume jewelry.