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NEW YORK (
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
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),
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.