Coverage: Perry Ellis goes private in deal with founder

Clothing designer-retailer Perry Ellis International Inc.  agreed to be taken private by its founder, George Feldenkreis, in a $437 million deal after Feldenkreis spent months pushing for the company to be sold.

Zachary Tracer of Bloomberg News had the story:

Investors will get $27.50 a share in cash, the Miami-based company said Saturday in a statement. That’s the same as Feldenkreis’s initial offer, and below the closing price on Friday. It’s about 19 percent more than the price Feb. 6, when Feldenkreis’s efforts became public after markets closed.

Fortress Credit Advisors LLC is providing $282 million in financing, with the rest coming from the Feldenkreis family and Wells Fargo Bank, according to the statement.

Feldenkreis had said the board wasn’t doing a good job and that going private would let the company take a long-term view to confront challenges facing the clothing industry.

“I am not comfortable with the motivations, strategy and oversight of the existing Board and believe shareholder value will suffer under this Board’s stewardship,” he said in a filing in February. “The Company, its licensees and its employees would benefit greatly in the long run from private ownership.”

Douglas McIntyre of 24/7WallSt.com reported that recent sales have been lackluster:

The company’s numbers for the most recent quarter were lackluster:

Total revenues rose 5.4% to $255 million from $242 million in the first quarter of fiscal 2018. Revenues were fueled by growth in Golf and Nike Swim and a high-single digit increase in the Direct-to-Consumer channel sales.

GAAP pre-tax income was $13.1 million compared to $14.5 million in the first quarter of fiscal 2018, and adjusted pre-tax income rose 7.6% to $15.6 million from $14.5 million in the first quarter of fiscal 2018.

The results reflect the same kind of slow growth, or no growth, other retailers are suffering. Over the last five years, its shares have under-performed the market, up 32% against a gain of 75% in the S&P.

Even if shareholders believe they should have done better, they no longer face the risk of the value of a company which operates in an industry in trouble.

Rob Wile of The Miami Herald reported that Feldenkreis’ son will continue as CEO:

Oscar Feldenkreis, George’s son, will continue to lead the company as chief executive officer. George will return to an active role in the management of the company.

“I believe this transaction will open an exciting new chapter for Perry Ellis, our customers and employees,” George Feldenkreis said in a statement. “The markets the company competes in have undergone transformative changes and I believe that Perry Ellis’ ability to invest and innovate is limited by the short-term pressures of being a public company.”

A representative for Feldenkreis said he could not make further statements until the transaction officially closed. In an interview with the Miami Herald last month, Feldenkreis described the company as his “baby” and said that the previous nine months, which saw him removed from Perry Ellis’ leadership, had been the most difficult period of his professional life. He said he was seeking to take the company private in order to modernize to face the challenges of the 21st century retail environment.

Feldenkreis, 82, founded the company in 1967 as Supreme International as part of a larger importing venture. The company went public in 1993 and acquired the famed Perry Ellis fashion house in 1999, at which point it changed its name to Perry Ellis International.