Randa Accessories plans to push on in its bid for Perry Ellis, but a regulatory filing indicates that the apparel firm’s Special Committee might already be done listening.
Perry Ellis International Inc. on Wednesday revealed the terms of its buyout deal with founder George Feldenkreis in a Securities and Exchange Commission filing. And contrary to Randa’s claim that the Special Committee isn’t doing its job because it refuses to open a dialogue with them about their new offer, a separate filing containing a preliminary proxy statement from Perry Ellis indicates that the company and its advisers have done a number of back-and-forth talks between April 5 — when Randa first expressed interest — and Monday in connection with the accessories firm’s most recent letter. Further, the filing sets forth the number of times that the Special Committee and its advisers have met to analyze the sufficiency of Randa’s offers and other documentation each time it has done a reachout.
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The filing indicates that Randa on May 21 submitted a bid package that was later deemed “materially insufficient in both amount and certainty.” Two days later, lawyers for Randa and Perry Ellis had a call regarding the insufficiencies in the draft debt commitments, and on May 25 the filing said Randa’s counsel acknowledged that its client was “unlikely to have fully committed financing” by May 29 — the initial deadline imposed by Feldenkreis to conclude a deal before he walked. There was an indication in the filing that on May 28, a meeting was held in which Randa’s chief executive officer said he was interested in owning Perry Ellis, but “did not want to bet the Randa business to accomplish this without an equity partner.” The filing said he indicated that he was in talks with a potential partner, but that Randa was still trying to find a “workable structure due to anticipated tax consequences” and that it still didn’t have any financing in place. Further, Randa was still seeking the okay to hold conversations with inbound licensors.
While the discussions with Randa were being held, Perry Ellis’ advisers were also in negotiations with the Feldenkreis team regarding the terms of the merger agreement, financing and other concerns they had. There were indications of negotiations on whether a go-shop provision should have been included, would Feldenkreis up his offer, and the fact that Perry Ellis’ financial adviser reached out to 18 parties — nine private equity firms and nine strategics — and only Randa inked a confidentiality agreement.
Randa delivered a revised merger agreement on May 29, and by June 15 there was a meeting between the Special Committee and its advisers to discuss both proposed offers from Feldenkreis and Randa, as well as an update on Randa’s progress. The Special Committee concluded that the Feldenkreis offer was the better one.
Subsequently to Perry Ellis and Feldenkreis inking their agreement, Randa on June 20 sent another letter to Perry Ellis indicating its interest and nonbinding offer at $27.75 a share, but again without the requisite financial commitments. The filing said the Special Committee met with advisers to discuss the June 20 letter, and after reviewing its fiduciary obligations with legal counsel, as well as its obligations under the merger agreement, “directed its advisers not to respond to Randa’s communications at that time.”
On June 22, Randa delivered revised debt commitment letters to Perry Ellis’ financial adviser. The apparel firm’s advisers, after reviewing the Special Committee’s fiduciary duties and on the financial adviser’s opinion that the revised debt commitment letters still “appeared insufficient,” were then directed by the Special Committee not to respond to Randa’s communications at that time. Randa on June 27 indicated that it expected to raise its per share offer, and again, the Special Committee on June 28 after a review of its fiduciary obligations directed advisers not to respond.
By July 1, Randa upped its offer to $28 a share, but it was still a nonbinding offer and it required as a pre-condition to a definitive agreement that it meet with Perry Ellis’ inbound licensors.
The Special Committee on July 2 met with its advisers to discuss the letter and subsequently issued a response detailing the insufficiencies of the updated offer.
On Monday, Randa sent a letter to the Special Committee noting its disappointment with the lack of communication by them with respect to its proposal. The filing said the Special Committee again met with advisers to discuss the letter, going over each point raised by Randa. The filing said the Special Committee “unanimously directed its advisers not to engage further with Randa at that time” and that in reaching its conclusion, noted that there was “nothing new in terms of value or certainty,” and that the characterizations of conditionality in Randa’s nonbinding proposal were “misleading and incomplete.”
Details about the talks between Perry Ellis and Feldenkreis, as well as those involving Randa, were disclosed for SEC review, particularly since there would be closer scrutiny with the Feldenkreis deal as it is considered an “insider transaction.”
In the separate filing on the buyout structure, the merged entity will be split into subcompanies that will hold different parts of the business, turning each component into its own “silo.” That structure allows the businesses to serve essentially as collateral for the different financing arrangements that are in place to close the transaction.
Executives at Randa could not be reached for comment on Wednesday, although sources with knowledge of their thinking said the company is likely to take a few days before releasing a response.