American Apparel Inc. founder Dov Charney, who was fired by the company this week, is working with private- equity firm Irving Place Capital on a bid to acquire the retailer.
American Apparel store | Source: Shutterstock
LOS ANGELES, United States — American Apparel Inc. founder Dov Charney, who was fired by the company this week, is working with private- equity firm Irving Place Capital on a bid to acquire the retailer, according to a person familiar with the situation.
The offer would value the company at $1.30 to $1.40 a share, according to the person, who asked not to be identified because the matter is private. The board is currently reviewing a takeover proposal, another person said.
The acquisition talk follows six months of turmoil at the apparel company, which first suspended Charney as chief executive officer in June before ultimately firing him on Dec. 16. In removing Charney, the board cited allegations of misconduct, including violating the sexual-harassment policy and misusing corporate funds.
American Apparel, based in Los Angeles, declined to comment.
News of the takeover bid, which was first reported by the New York Post, sent the shares soaring 45 percent to $1, the biggest single-day gain in more than five years.
After firing Charney earlier this week, the company hired retail veteran Paula Schneider as its next CEO. Charney remains American Apparel’s largest shareholder, with a 43 percent stake. However, he shares the voting rights on the stock with Standard General, a New York-based hedge fund that loaned Charney money earlier this year to help him build his holdings.
The clothing chain is struggling with red ink and sluggish sales. It has racked up more than $300 million in net losses since 2010, forcing it to raise money to make ends meet — most recently in July when it received a capital commitment of $25 million from Standard General.
Standard General declined to comment, while Irving Place didn’t immediately respond to a request for comment.
If Irving Place can reach a deal, it would lead to the 45- year-old Charney returning to the company in some capacity, one of the people said. Irving Place, based in New York, has previously invested in New York & Co., Pet Supplies Plus and Rag & Bone.
Charney still has some support within American Apparel’s management ranks. More than 30 executives sent a letter to the board this week asking directors to reconsider their decision to fire him. Charney should be a part of the retailer’s future by helping the next CEO improve the chain because he is what “makes this thing tick,” the managers said.
By Matt Townsend. Editors: Nick Turner and Stephen West.
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