Perry Ellis International Inc. and its activist investors are now locked in a proxy fight.
The investors, Legion Partners Holdings LLC and the California State Teacher’s Retirement System, combined in July to take a 6 percent stake in the firm, since expanded to 6.3 percent. In their pursuit of a stronger financial performance and balance sheet, they are looking,through shareholder proposals, to separate the roles of chairman and chief executive officer, both currently held by George Feldenkreis, and declassify the board into a single class. His son Oscar Feldenkreis is vice chairman, president, chief operating officer and, like his father, a director of the company. Together, the two hold 21.1 percent of the company’s stock, according to the firm’s 2014 proxy.
According to their filing with the Securities and Exchange Commission, the investors intend to nominate Robert Mettler, Darrell Ross and Joshua Schechter for election as additional members of the board at directors. Mettler is also among the nominees put forth by other activist investors in in The Children’s Place proxy fight.
Perry Ellis’s annual meeting, held June 5 last year, will take place on July 17 at a time and location still to be determined.
Staggered boards — where directors serve different terms and are elected at different times — were a common anti-takeover defense measure in the Eighties when corporate raiding was the rage. Activist shareholders prefer non-staggered or declassified boards because they make it easier for activists to get a majority of board seats, and exert board control and influence, in one election.
“We have serious concerns that the Feldenkreis family has chosen to run Perry Ellis in a manner that benefits its own interests rather than in the best interests of all shareholders,” said Chris Kiper of Legion in Friday’s SEC filing. “We believe maintaining the status quo under the leadership and control of the Feldenkreis family creates an unnecessarily high risk that Perry Ellis will continue to underperform, causing irreparable value destruction for shareholders.”
Perry Ellis had no immediate response to Friday’s letter but directed those with questions to a press release issued in February, following Legion’s initial public criticisms of the firm, in which the company said it had already taken steps to address both corporate governance and performance issues.
At that time, the company cited the appointments of three independent directors — David Scheiner, Alexandra Wilson and Jane DeFlorio — as part of its effort to bring the company into adherence with best practices.
In summarizing operating enhancements, it noted that direct-to-consumer revenues accounted for 10 percent of the total and international 11.3 percent. It also noted its exit from 29 businesses involving “low-margin brands” and $8.2 million in cost of goods sold and selling, general and administrative costs that had been pared.
Shares Friday rose 0.9 percent to $24.27.