American Apparel Inc. has refused to call a stockholder meeting requested by ousted Chief Executive Dov Charney and maneuvered to block him from retaking control of the company.
The Los Angeles retailer said Monday that a shareholder meeting demanded last week by Charney to change the company's bylaws and expand the number of board members is intended to push his "own self-interest," according to a filing with the Securities and Exchange Commission.
Over the weekend, American Apparel said, it tweaked its own bylaws. The company also adopted a shareholder rights plan — also known as a "poison pill" — designed to prevent Charney from buying enough shares to regain control.
American Apparel said that its amended bylaws roughly doubled the time required to nominate directors and submit stockholder proposals at its annual shareholder meetings, stripped executives and stockholders of the right to call special meetings and emphasized that board directors can be removed only "for cause."
On Friday, Charney, who owns a 27% stake in the company, said he had reached a deal with New York investment firm Standard General to gain control of more American Apparel shares, according to a security filing.
As a countermove, American Apparel said Saturday that it adopted the poison pill plan, which gives shareholders the right to buy one 10,000th of a share of preferred stock at an exercise price of $2.75.
The retailer's board voted June 18 to replace Charney as chairman and terminate him as chief executive pending an investigation "into alleged misconduct." The vote resulted in Charney's immediate suspension; under his contract, termination requires a 30-day delay.
The company has been working hard to counter any attempts by Charney to get back his job. His lawyer, Patricia Glaser, filed an arbitration petition last week with the American Arbitration Assn. alleging wrongful termination, breach of contract and retaliation, among other issues.
Aside from its difficulties with Charney, American Apparel is struggling to overcome many hurdles.
The retailer has lost nearly $270 million in the last four years and is more than $200 million in debt. The company has warned that firing Charney could trigger defaults on nearly $40 million in loans and force it into bankruptcy.
One lender, Lion Capital, has demanded repayment on a $10-million loan this week, according to the New York Post. That could trigger another default on a $30-million loan with Capital One.
Allan Mayer, the retailer's co-chairman, said that the company had sufficient capital to pay off the loan if Lion asks to be repaid right away.
Some analysts have speculated the company will be taken over by an investment firm or retailer, although interim Chief Executive John Luttrell has firmly denied any interest in a sale.
But over the weekend, American Apparel made several references to the possibility of a sale.
The company said the stockholder plan has "no impact on a takeover for the entire company acceptable to the holders of a majority of the company's shares."
"The rights plan is not intended to prevent or deter takeover bids that offer fair treatment and value to all stockholders," American Apparel said. "Rather, the rights plan is intended to protect stockholders from any threat of creeping control."
Shares of American Apparel were down to 8.6%, or 8 cents, to 88 cents on midday trading Monday.