The Wall Street Journal-20080212-Kellwood Agrees to Be Acquired by Sun Capital

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Kellwood Agrees to Be Acquired by Sun Capital

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A month after Sun Capital Securities Group LLC launched a hostile tender offer for Kellwood Co., the middle-market apparel maker agreed to be acquired.

Calling Sun Capital's offer of almost $544 million, or $21 a share, "fair, in the absence of superior bids," Kellwood yesterday endorsed the tender offer, which is set to expire at midnight today. Sun Capital, a Boca Raton, Fla., investment firm, already owns 11.4% of Kellwood's shares.

As of yesterday, sufficient shares had been tendered to give Sun Capital majority ownership of Kellwood, people familiar with the matter said.

Sun Capital, which has invested in underperforming firms such as apparel-maker Lee Cooper and retailer Mervyn's, has been trying to acquire Kellwood since September, when it first proposed buying the St. Louis company for $21 a share. Kellwood, which owns the Phat Farm, Vince and Sag Harbor labels, has suffered as department stores have consolidated and shifted toward lifestyle and designer brands.

"We are prepared to commit substantial resources beyond the purchase price to build Kellwood's business," said Jason Bernzweig, vice president of Sun Capital. Robert C. Skinner Jr., Kellwood's chief executive, said "Kellwood will continue to execute on its strategic priorities to position the company as a brand-focused marketing enterprise."

Sun Capital had been critical of Kellwood management. Last month, it blasted the company, saying it missed its financial targets and "destroyed shareholder value through ineffective use of its capital."

Hostile takeovers are rare. Last year, 2.5% of all deals announced in the U.S. were hostile, down from 3.85% in 2006, according to Factset MergerMetrics, which supplies data to financial firms.

Kellwood's board twice rebuffed Sun Capital last fall and opposed the tender offer. But in a reversal two weeks ago, the board said it would comply with Sun Capital's request that it drop its $60 million offer to repurchase debt and remove any measures that would have stood in the way of a deal.

Some shareholders had publicly voiced support for a takeover.

Salvatore Milazzo, an analyst with StoneRiver Capital Partners in Jackson Hole, Wyo., which owns less than 1% of Kellwood shares, says he plans to tender the firm's shares. "Obviously in a different market environment we might have hoped for more, but I just don't think there are really any other options on the table."

Kellwood's shares rose 41 cents to $20.94 at 4 p.m. in New York Stock Exchange composite trading.