Backstage at Perry Ellis Men's Fall 2018

For Perry Ellis International Inc. shareholders, it’s not over until it’s over.

Randa Accessories has made a competing nonbinding offer to acquire Perry Ellis at $28 a share. The offer price is 50 cents a share more than the offer accepted by the Perry Ellis board from former chairman and founder George Feldenkreis.

And now that the race is on, investors are looking for even more and traded shares of Perry Ellis went up 8 percent to $29.33 Monday.

The company acknowledged the offer and said: “The special committee of the Perry Ellis board, in consultation with its independent financial and legal advisers, will carefully review and evaluate Randa’s proposal to determine the course of action that the special committee of the Perry Ellis board believes is in the best interest of the company and all Perry Ellis shareholders. Perry Ellis remains subject to the Feldenkreis merger agreement.”

Randa was in discussions with Perry Ellis to acquire the company before the board’s special committee recommended that the board accept the offer from Feldenkreis, who submitted his bid earlier this year.

Jeffrey Spiegel, chief executive officer of Randa, said, “Randa believes we are the right acquirer for Perry Ellis and that our compelling proposal provides shareholders with a superior alternative to the previously agreed insider transaction.”

Spiegel cited Randa’s successful history as a licensee for brands such as Levi’s, Dickies, Tommy Hilfiger, Chaps, Columbia Sportswear and Timberland, among others. He also said, “We believe we can continue and grow the relationships with Perry Ellis’ inbound licensors for the benefit of all stakeholders in those relationships.”

Randa on Sunday sent a letter to J. David Scheiner, chairman of Perry Ellis’ special committee, and to Tricia Thompkins, the company’s general counsel.

The letter noted Randa’s “tremendous admiration” for Perry Ellis, as well as the fact that Randa would enter into the agreement as a company with “significant cash on hand, no debt” and key retail relationships around the world.

David Katz, executive vice president and chief marketing officer of Randa, said that although Randa is essentially an accessories firm and PEI is primarily apparel, the two are not that dissimilar.

“We don’t see the businesses as disparate. We’re both trading in the general merchandise apparel and fashion retail space,” Katz said.

He said both companies serve “similar and adjacent customers” including Macy’s, Dillard’s, J.C. Penney, Kohl’s and others.

Additionally, PEI has a strong accessories business and the fact that it owns brands — Perry Ellis, Original Penguin and Cubavera among them — has a solid direct-to-consumer business and international licensing program is also appealing to Randa.

“We think the brand portfolio is very complementary and will mesh up well,” Katz said.

He pointed to Randa’s 40-year history of managing brands through its licensing program as a benefit of the deal as well.

Heath Golden, president of Randa Digital Labs, reiterated that the deal is “fully financed” and consists of outside debt and company cash.

Industry sources have speculated that the surprise offer from Feldenkreis to take the company private didn’t give other potential buyers sufficient time to line up financing, unlike situations where companies first put themselves up for sale and then go through a process that includes first and second round bids. 

While the Perry Ellis board has a fiduciary obligation to consider all better offers, Randa’s deal — the value of its proposed transaction is $444 million versus the agreement with Feldenkreis at $437 million — is just 50 cents a share more than what Feldenkreis offered.

Further, the current offer on the table from Randa is nonbinding, subject to further discussions to reach a definitive agreement. Because there was no go-shop provision in the Feldenkreis deal, the Perry Ellis board can’t just shift gears and start negotiating with Randa. But it might decide to engage with Randa if it deems that the additional 50 cents a share is a far better deal and it thinks it can also reach a definitive agreement. It will then have to break the existing deal with Feldenkreis, putting Perry Ellis on the hook for a break-up fee valued at around $8.5 million.

The Perry Ellis board’s responsibility to its shareholders includes more than just purchase price.

It is not clear what the structure of the licensing agreements are with its brand partners. Most of the licensing agreements with inbound brands have change in control provisions. That’s essentially an opt out clause that gives the brand owners the right to exit a licensing agreement when the licensee changes ownership. 

In the case of Perry Ellis, a deal with Feldenkreis essentially doesn’t change the operating component of the company, and licensors likely would continue with the company. A deal with Randa likely would entail some risks, given that it is a company more familiar with accessories than apparel. Such a deal could put the company at risk of losing some brands if they elect to use the change in control clause. Randa could get around that by getting the approval of brands, but most would probably want a deal in place first before making a decision to stay in place.

Feldenkreis declined to comment and Scope Capital Partners, his financial adviser, was not available for comment. Perry Ellis did not respond to a request for comment.

Products produced by Randa under its Trafalgar brand. 

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