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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