American Apparel Inc., the retail chain that ousted its controversial founder last week, said a buyer has expressed interest in acquiring the company for as much as $1.40 a share, confirming reports that have driven up the stock.
The company, one of several retailers that Mergers & Acquisitions put on bankruptcy watch for 2015, also said today that co-chairmen Allan Mayer and David Danziger have stepped down. They will be replaced by Colleen B. Brown, who joined the board in August. Mayer and Danziger will remain directors and keep their committee posts, the Los Angeles-based retailer said in a statement.
The takeover interest and board shake-up signal that the company hasn’t yet emerged from the upheaval surrounding its split with founder Dov Charney. American Apparel first suspended Charney as chief executive officer in June before ultimately firing him last week. In removing its leader, the board cited allegations of misconduct, including sexual-harassment policy violations and misuse of corporate funds. Charney’s lawyer has called the allegations “baseless.”
The acquisition proposal, which was first reported by the New York Post, sent the shares soaring 45 percent to $1 on Dec. 18, the biggest single-day gain in more than five years. The stock rose 2.8 percent to $1.10 at 1:06 p.m. today in New York.
The retailer’s board said yesterday that it adopted a shareholder rights plan to prevent a person or group from accumulating more than 10 percent of the stock. However, the plan isn’t meant to protect against offers for all of the company, the retailer said.
The takeover proposal, which values the company at $1.30 to $1.40 a share, is backed by private-equity firm Irving Place Capital and would involve Charney returning to American Apparel in some capacity, a person familiar with the situation said.
The board said that while it remains focused on turning the company around, it takes the acquisition proposal seriously and will evaluate it.
American Apparel has racked up more than $300 million in net losses since 2010, forcing it to raise money to make ends meet. Its most recent infusion came in July, when it received a capital commitment of $25 million from Standard General, a New York-based hedge fund.
After firing Charney on Dec. 16, the company named retail veteran Paula Schneider as its next CEO. Charney remains American Apparel’s largest shareholder, with a 43 percent stake. However, he shares the voting rights on the stock with Standard General -- part of a deal that he forged with the firm to build up his holdings.
Charney now says that Standard General betrayed him. The firm had pledged to help restore his position in the company but instead he was terminated, the ex-CEO told Bloomberg Television’s Trish Regan in an interview last week. Charney also said that he has only $100,000 to his name and is staying with a friend in Manhattan’s Lower East Side, Regan reported.
In responding to the remarks, Standard General said its objective is to help American Apparel “grow and succeed.” The company supported the independent investigation into Charney’s conduct that resulted in him being fired.
Standard General respects “the board of directors’ decision to terminate him based on the results of that investigation,” the firm said in a statement.
Not everyone in the company was eager to see Charney go. More than 30 executives asked the board to reconsider their decision to fire him, according to a letter obtained by Bloomberg News.