Kenneth Cole offers to take his fashion house private
American clothing designer Kenneth Cole is seeking to regain full ownership of his eponymous clothing and footwear house, saying being away from Wall Streets glare could help the company turn around its flagging business.
Kenneth Cole Productions Inc (KCP.N), founded by the designer in 1982, was stung by the recession as shoppers cut back on discretionary spending, and has struggled to keep up with rivals like Michael Kors Holdings Ltd (KORS.N).
The designers offer of $15 a share is 15 percent more than the stocks Thursday close, but is substantially less than the $50 levels that the stock traded at in the early 2000s.
Kenneth Cole Productions shares were trading well above the offer price at $15.56 on Friday, indicating that investors were expecting a higher bid.
"They should go private but the price needs to be better," said Shawn Kravetz, president of investment fund Esplanade Capital LLC, which has held the stock for some 5 years now.
The investor thinks the price should be closer to $20 a share.
Separately, the company said it has formed a special committee of independent directors to consider the offer and solicit alternative transactions.
"Additional bidders in the process are likely to be non-existent as Coles desire to work for somebody is notoriously low," CL King & Associates analyst Steven Marotta wrote in a client note.
Cole will likely offer an attractive premium to the $15 starting point, but may even leave the public entity intact if the stock trades above his unknown drop-dead level, Marotta said.
A GLIMMER OF LIGHT
Kenneth Cole, who already owns a 47 percent stake in the company, said taking the company private would be in the best interests of the business as the public markets were too focused on short-term results.
"Its a step in the right direction ... After this lost decade theyre starting to see a glimmer of light," Esplanade Capitals Kravetz said.
The companys performance is in stark contrast to its rivals like Michael Kors, which has seen its stock more than double in value since its market debut in December.
Kenneth Cole Productions, which went public in 1994, has posted weaker-than-expected sales for the past two quarters and its margins have shrunk for at least four quarters hurt by higher sourcing costs and heavy promotions.
The mid-grade fashion house -- which sells footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York, Kenneth Cole Reaction, Unlisted and Le Tigre -- has closed stores to flush out excess inventory.
Two years ago, the company, which started in a 40 feet trailer at 1370 6th Avenue in New York, was reportedly in talks with Iconix Brand Group Inc (ICON.O), headed by the designers younger brother Neil Cole, but no deal materialized.
Last year, Cole surprised investors by taking the reins from former Chief Executive Jill Granoff on an interim basis, eventually handing the top job to company veteran Paul Blum.
The designer, who serves as the companys chairman and chief creative officer, expects the management team to remain in place following the proposed deal.
Cole is known for his philanthropic efforts, such as publicly supporting AIDS awareness and research, but sparked controversy last year when his tweet referring to the unrest in Egypt drew criticism online. He later withdrew the tweet and apologized on Facebook.
Cole has hired Willkie Farr & Gallagher LLP as legal adviser for the transaction.
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