BUSINESS OF FASHION: HEADLINER OF THE YEAR–WHAT’S NEXT FOR AMERICAN APPAREL?
If you think 2014 headlines were dominated by updates and news from American Apparel, you would be right. Just as we approach the year-end, they have done it again by adopting a stakeholder rights plan, better known as a poison pill. A poison pill is a strategy used by corporations to discourage hostile takeovers made possible by the target company attempting to make its stock less attractive to potential acquirers; it also plans to prevent any investor from acquiring a controlling stake in the beleaguered company without consent of other shareholders.
The company states “The rights plan is intended to protect stockholders from any threat of creeping control, provide the board and stockholders with adequate time to properly assess a take-over bid without undue pressure, and provide them with adequate time to fully assess an unsolicited take-over bid.”
It is no shocker that American Apparel is gaining plenty of interest these days: including Dov Charney’s termination and the pending takeover offer from Irving Place Capital, which is offering to pay as much as $1.40 per share for the firm, among others.
This poison pill is not designated to prevent an offer for the company in its entirety; however, it will undoubtedly make it expensive for an investor to assume control of the company and will not kick in until a person or group acquires 10% or more of the company’s stock.
American Apparel’s stock closed last Friday at $1.07, giving the company a market capitalization of a whopping $187 million. Stay tuned for possible investor activity come the New Year.