Christopher & Banks Rejects $64M Bid, Adopts “Poison Pill”
Christopher & Banks Corporation’s board of directors has rejected an unsolicited, $64 million buyout offer from Boston-based Aria Partners, saying that the offer wasn’t in the best interest of stockholders.
Aria, an investment management firm, owns 4 percent of the women’s clothing retailer. On July 3, it offered to buy the company for $1.75 per share—which represented a 51 percent premium over the previous day’s closing price.
Plymouth-based Christopher & Banks said Friday that its board and its financial and legal advisors carefully reviewed the offer but determined that it’s best to stick with the company’s own turnaround strategy, which has already “brought stability to and energized the organization.”
The retailer said 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.”
Consequently, the board concluded that the proposal “does not reflect the full, long-term value stockholders are expected to receive from continued focus on the current strategy.”
In addition to rejecting Aria’s proposal, Christopher & Banks also adopted a shareholder rights plan, better known as a “poison pill”—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.
According to Christopher & Banks, “the plan is designed to deter coercive or unfair takeover tactics, including the accumulation of shares in the open market or through private transactions, and to prevent an acquirer from gaining control of the company without offering a fair and adequate price to all of the company’s stockholders.”
The company also adopted a “management retention plan” that includes lump-sum payments of one year’s base salary to Senior Vice Presidents Peter Michielutti (who is also chief financial officer) and Monica Dahl. The payments would be distributed at the end of a year, or when the company is sold, should a sale occur before then.
In a filing with the U.S. Securities and Exchange Commission, Christopher & Banks said that the management retention plan payments are being made “in order to ensure that the most critical members of management remain fully engaged and focused on driving improved performance at the company . . .”
Aria said that the offer it extended last week was its second and that it decided to go straight to shareholders after a May 21 offer was “immediately dismissed” by the company.
“In a few short years, the company has been reduced from a peak enterprise value of $600 million to a mere $35 million today,” Aria Partner Edward Latessa wrote in a July 3 letter to Christopher & Banks’ board.
Latessa added: “[W]e believe we can fix this company and are willing to put up the capital, expertise, and manpower to do it. Given that it will be our capital at risk, we will be highly motivated and highly incentivized to return this company to profitability.”
Christopher & Banks on Friday 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. President and CEO Joel Waller, who took the helm after former CEO Larry Barenbaum abruptly resigned in February, said during a March conference call that the company boosted average prices by 23 percent in fall 2011, and customers responded negatively to the move.
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.