This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Kenneth Cole Refuses to 'Shop' His Line in Upping Buyout Bid

Stocks in this article: KCP TLB LIZ KORS

NEW YORK ( TheStreet) -- Kenneth Cole Productions (KCP) is being taken over for $15.25 a share, or 17% more than a buyout offer unveiled by the company's founder and chairman Kenneth Cole on February 23.

While Cole is still buying his namesake fashion label and attempting to take it private, the increased offer skirts a formal shopping of the company to strategic or private equity acquirers amid concerns from analysts and investors who felt the initial bid was undervalued.

The increased bid price, in addition to a similar but more hotly contested buyout of J.Crew in 2010, signals that shareholders in fashion labels with a namesake or key designer as a large shareholder may want to be increasingly weary of selling to management at what could be discount rack prices.

Kenneth Cole's desire to work for somebody else is "notoriously low": analyst.

Citing profitability and competitive challenges, Cole offered to buy the company in February at $15 a share or roughly a 26% premium to the company's average stock price at the beginning of 2012. Still, the offer was well below a post-crisis September 2010 share price high of $16.50.

The new deal values Kenneth Cole at a market value of $280 million. In a statement, the company said that after forming a special committee with Cole and chief executive Paul Blum and the assistance of financial advisors, it unanimously concluded that the revised $15.25 offer was in the "best interests" of the company's shareholders.

But shareholders may still have a say, and there appears to be more to ask for than just a higher price in the sale process. Kenneth Cole hasn't indicated that it is willing to enter a formal "go shop" period in search of a higher priced bid from a competitor or private equity firm. Meanwhile, as in February, a majority of the shares of the company not owned by Kenneth Cole and his affiliates will need to vote in favor of the deal agreement for it to close.

Cole, who founded the New York-based clothing, footwear and fashion apparel designer in 1982 and took the company public in a 1994 IPO holds a 47% of the company's stock and 89% of its voting rights, making him a key to any strategic move.

The buyout offer comes at a time when mass-fashion mainstays like Kenneth Cole and Liz Claiborne (LIZ) struggle with post-crisis profitability and insurgents like Michael Kors (KORS - Get Report), Lululemon (LULU) and DSW (DSW) report strong earnings.

But analysts argued that Kenneth Cole may be close to an earnings recovery and the timing of the buyout was an opportunistic play to get shares on the cheap.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs