After giving its notoriously lascivious founder Dov Charney the boot last week, American Apparel is buttoning up its image and talking with a prospective buyer. Shares were up 7% yesterday after Irving Place Capital offered between $1.30 and $1.40 per share, a premium over the current trading price of $1.06, in a deal that would value the company at $245 million.
The news represents a glimmer of hope for American Apparel, which is limping forward after a six-month period in which it churned through four CEOs. The company has posted a net loss every quarter so far this year, with flat sales across its roughly 250 stores.
American Apparel first suspended Charney from his role as CEO in June after determining that he had violated company policy in his misuse of funds and failure to halt publication of a former employee’s nude photos. Charney’s character has been an issue since 2011, when a former sales associate sued him for sexual harassment.
The choreography of the pending sale is complicated by Charney’s large stake in the company. As of August 1, the date reported in the company’s latest quarterly filing, Charney owned 42.8% of outstanding common stock. His voting rights are entwined with those of Standard General, the hedge fund he approached for a loan after his June suspension. Standard lent Charney the funds to increase his holdings, but with a catch: Standard would control Charney’s voting rights.
Meanwhile, newly appointed CEO Paula Schneider has been carefully maneuvering to ensure that Charney, who still has allies within the company, is unable to launch a hostile takeover. Yesterday she announced that she had instituted new shareholder rights and restructured the board of directors while appointing a new chairperson.
As for Charney, who had been earning $800,000 per year: He told Bloomberg that he is broke and crashing with a friend.
[h/t: Associated Press]