NEW YORK (The Deal) -- American Apparel's (APP) founder Dov Charney is looking for a comeback as the board adopts an unusual poison pill trying to keep him at bay, while it negotiates with its lenders.
But its days may be numbered as an independent company, sources say, because pressed on all sides, a sale may be the best way out.
The shareholder rights plan was passed by the board Saturday, after Charney said in a securities filing on Friday that he had formed a pact with New York-based Standard General LP, for the event driven firm to buy 10% of the retailer's shares, and then loan Charney the money to buy that stake from the firm.
Charney, however, didn't waste a moment. In a regulatory filing Tuesday, he claimed that Standard General had already completed its share purchase Friday, meaning that Charney was now almost a 43% stake holder.
He also said, that, in his role as CEO, he was calling a special meeting of shareholders for Sept. 25 to enlarge the board and consider other proposals including the election of dissident nominees.
The drama unfolded after the board suspended Charney as CEO on June 18 over what it said was "alleged misconduct" including violating the company's sexual harassment policies and misusing corporate assets. Charney's attorney has denied the charges. After a 30-day cure period, he would be out as chief executive.
But whatever the problems with keeping Charney on, moving against him had its risks, as it could trigger default provisions in a $10 million loan advanced by Lion Capital.