Christopher & Banks Investor, Would-Be Buyer Blasts Board

A minority shareholder whose offer to buy the struggling retailer was rejected says it is looking to protect shareholders from “hostile opportunists” on the company’s board.

Five days after Christopher & Banks Corporation’s board rejected an unsolicited, $64 million buyout offer from a minority investor and adopted a measure to discourage a hostile takeover, the would-be suitor sent a sharply worded letter of ridicule and continues to push for a sale.

The investor, Aria Partners, owns 4 percent of the Plymouth-based women’s clothing retailer. The offer that it extended on July 3, its second, represented a 51 percent premium over the previous day’s closing price.

Aria took issue not only with Christopher & Banks’ decision not to sell, but also its adoption of a shareholder rights plan, better known as a “poison pill”—which is a measure that corporations take to discourage hostile takeovers. The plan will essentially dilute the stock of an investor that acquires 15 percent or more of the company’s shares.

“To begin, poison pills are designed to protect shareholders from hostile opportunists. In this case, the hostile opportunists are the board of Christopher & Banks, not us,” Aria Partner Edward Latessa wrote in a Wednesday letter to Paul Snyder, the non-executive chairman of Christopher & Banks. “When your stock trades at $1 per share and someone offers you $1.75 per share, they are not the enemy.”

Christopher & Banks said Monday that its board and financial advisors reviewed Aria’s offer but determined that it was not in the best interest of stockholders and that the best course of action would be to stick with the company’s own turnaround strategy.

To that, Latessa fired back: “This is the same board that signed off on Larry Barenbaum’s strategy (the former CEO) of raising average unit prices by articulating the merchandise. This course of action proved to be a disaster. How are we to have any confidence that this same board is able to implement a new strategy which, to date, has similarly failed to turn things around?”

According to Latessa, both Snyder and Christopher & Banks’ lead Director Ann Jones have received more than 100 percent of the company’s earnings in directors’ fees over the last few years despite the fact that shares of its stock have plummeted more than 80 percent during that period. “It reminds us of the farcical plot of The Producers, where Bialystock and Bloom scheme to get rich by overselling interests in a Broadway flop,” Latessa wrote.

Latessa went on to say that the board’s credibility when it comes to implementing a strategy to turn itself around is “worthless based on its record thus far”—and he argued that board members would be investing their own money in Christopher & Banks shares if they truly believed that their strategy would prove successful.

“If you were a contestant on Project Runway, you would have been laughed off, but somehow you continue to wield influence in the boardroom of a publicly traded fashion company,” he wrote.

He concluded by reiterating that it’s time for Christopher & Banks to change hands. “You’ve engaged credible bankers and lawyers,” he wrote. “Put them to work running a sale process and let the market decide who should manage and own this company. This is what we and the rest of your shareholders demand.”

Christopher & Banks said Monday that its merchandising and marketing strategies “are expected to deliver improved sales, margin, and cash flow performance in the second half of fiscal 2012 and beyond.” It also reaffirmed four key priorities that it previously outlined. They involve reducing the number of styles offered this fall and “rebalancing” its assortment; lowering prices and reducing the variety of prices; improving inventory flow by reducing the number of major floor sets by half; and developing a promotional strategy that features more targeted, unique promotions and fewer storewide events.

Christopher & Banks operates 658 stores in 44 states. For the fiscal year that ended January 28, it reported a net loss of $71.8 million, which included $9.8 million in charges related to restructuring efforts.

For the first quarter that ended April 28, Christopher & Banks reported a net loss of $13.4 million. Same-store sales—sales open for at least 13 months and an industry barometer—fell 15 percent during the period.