Frederick’s of Hollywood Group Inc., marketers of apparel for women’s most intimate moments, is poised to go private again.
The lingerie retailer, which entered the public markets upon its January 2008 merger with innerwear wholesaler Movie Star Inc., said it had agreed to be acquired by a consortium that currently holds 88.6 percent of its outstanding stock for 27 cents a share in cash. The price values the company at $27.3 million and would translate into a $3.1 million payment to holders of the other 11.4 percent of its equity.
The amount is 17.4 percent higher than the 23 cents a share offered in September by the consortium. It represents a premium of 50 percent to the closing price of the firm’s stock on Sept. 27, the last day of trading before the consortium made its buyout proposal, and a 46 percent premium to its average price in the 45 trading days prior to the offer.
The consortium consists of Harbinger Group Inc., its HGI Funding LLC affiliate, TTG Apparel LLC and Tokarz Investments LLC, all controlled by Michael Tokarz, and Fursa Alternative Strategies LLC and Arsenal Group LLC, both controlled by William Harley 3rd, a director of Frederick’s.
Upon consummation of the merger, which is subject to shareholder approval and other conditions, Thomas Lynch, chief executive officer of the company, would receive a new three-year employment contract calling for a base salary of $540,000 a year, a signing bonus of $150,000 and an unspecified equity interest in the firm.
The deliberations were handled by Milton Walters, the company’s lead independent director. Lynch and Harley recused themselves from discussions.
Frederick’s operates 112 specialty stores, a catalogue and an online store. In the three months ended Oct. 26, the firm registered a net loss of $7.7 million on a 12.1 percent decline in revenues to $19.7 million. When results were reported earlier this month, Lynch said the company was working with “lenders, manufacturers and partners” to overcome challenges posed by “the financial limitations of the business of the past several years.”