DKI STOCK UP BEHIND REPORTS
Byline: Vicki M. Young / With contributions from Miles Socha, Paris
NEW YORK — Shares of Donna Karan International picked up 15 cents to close at $8.90 on the New York Stock Exchange Tuesday, amidst continuing reports that LVMH Moet Hennessy Louis Vuitton would enhance its offer for the company.
As reported, LVMH in December offered to acquire the company for $195 million, or $8.50 a share. According to a DKI spokeswoman, LVMH already has closed on its $450 million purchase of Gabrielle Studio, the privately held licensor of the Donna Karan trademarks that was owned by designer Donna Karan and her husband, Stephan Weiss.
Harvey Robinson, an analyst at The Chapman Co., said: “The rationale behind the improvement in the stock price is that there possibly will be an offer north of the original $8.50.” Robinson noted that he wouldn’t expect the stock price to reach the $9.50 or $10 a share that LVMH is reportedly considering.
“The indication is that there may be a higher offer, but there’s no reason for investors to pay a premium,” he said. “They need to leave room to make a bit of money.”
LVMH has remained mum on the situation.
Following December’s LVMH announcement, DKI was hit by at least two shareholder lawsuits seeking class-action status and charging that the acquisition price was too cheap.
Robert Kaplan of Kaplan, Kilsheimer & Fox, a securities litigator specializing in class-action lawsuits, said that sometimes where there is a claim that the acquiror is not paying a fair price, the deal will get sweetened. By how much, however, would depend on the negotiations with counsel representing the complaining shareholders and the valuation that is placed on the company by underwriting experts, he said.
Even with a higher offer in place, completion of the settlement still could take three months. According to Kaplan, the lawyers would need to get preliminary approval from the court where the lawsuits were filed, give all other shareholders in the class action a chance to respond and then obtain final approval from the court.
Neither LVMH nor DKI are compelled to disclose any information about the offer price until they have reached and signed an agreement, noted one source. Currently, the view from industry experts is that DKI doesn’t have a lot of alternatives in terms of suitors. The source pointed out that the Gabrielle Studio agreement has a clause stating that if any company buys more than 30 percent of DKI, LVMH can terminate the license agreement, leaving DKI inert without the trademarks.