Kellwood has rejected Sun Capital Partners’ unsolicited $544 million (€381 million) buyout offer on the grounds that it “significantly undervalues” the US apparel marketing company’s potential for sales and earnings growth.
Baby Phat clothing
Sun Capital, which specialises in turnarounds and restructurings, submitted its $21 per share bid in late September. The bid represented a 38 percent premium over Kellwood’s stock price on 18 September. But after a consultation with Banc of America Securities, Kellwood’s board of directors declined the offer.
“We continue to believe that executing our corporate strategy to reinvigorate our core business, expand our penetration into higher profile, better and above price point brands, connect more directly with consumers, and utilize our operating infrastructure more efficiently to fund our growth will deliver greater value to our shareholders,” Kellwood said in a statement.
But some analysts disagree with Kellwood’s outlook. Two days before Sun Capital made its offer, Broadpoint Capital analyst Randall Scherago downgraded his rating on Kellwood from “buy” to “neutral”, according to Reuters.
“The company's strategy to reverse sales declines, the erosion of its operating margins, costs associated with the reorganization of women's sportswear business and a possible downgrade of debt could impair Kellwood's acquisition strategy,” Scherago reportedly said in a research note.
Kellwood markets clothing brands including Nautica and Baby Phat. The company had revenues of $2 billion in 2006.
Florida-based Sun Capital did not immediately return a request for comment.