Kellwood Company (NYSE:KWD) directors may have to fight for their jobs after private equity fund Sun Capital Parnters announced that it is considering a renewed bid to take over the clothing company through a hostile conditional tender offer. Kellwood rebuffed a previous offer of around $544 million, calling it too low without even putting it to a vote. Many shareholders are hoping that the move will go through and help boost shares from $17.59 today to over $21 in the event of a success.

Sun Capital’s new offer is expected to come in at the same $21 per share, but would include a key condition – the removal of a poison pill in Kellwood’s shareholder rights plan that prevents any holder from owning more than 20 percent of the company. The offer is also likely to be conditioned on the acceptance of a substantial enough portion of shareholders, in order to reduce the risk to Sun Capital of holding useless shares in the event that the move is unsuccessful.

So, what are the chances of success? Well, as we mentioned earlier there is a huge poison pill in place to protect the incumbent board. A vote of at least 75 percent is required to remove a director while only half of the board comes up for election in a given year. However, even if the bid proves to be unsuccessful, a large portion of shareholders voting against the company should send a clear message to the board that shareholders are unhappy with the company.

Overall, this is definitely a situation that is worth watching. If the private equity fund, which holds a 9.9% stake now, is able to garner enough support to increase their stake through a tender offer, we could see substantial changes aimed at unlocking shareholder value even further. It will be interesting to see how this one plays out…

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