By Tiffany Hsu
2:42 PM PST, December 19, 2013
Frederick’s of Hollywood Group Inc. is going private after years of financial struggle.
The local lingerie company will be bought out by a consortium that includes HGI Funding — a subsidiary of New York-based Harbinger Group Inc. — as well as some of its own shareholders.
The group, which created an entity called FOHG Holdings to buy the intimates merchant, owns 88.6% of Frederick’s common stock.
The buyers had originally offered 23 cents a share for Frederick’s before agreeing to pay 27 cents a share, a premium of 50% over the closing price on Sept. 27, the final trading day before the original proposal was made.
The price values the deal at $10.6 million.
Frederick’s board approved the plan, which must also be OK'd by shareholders.
As part of the deal, current Chief Executive Thomas Lynch will retain his position for three years after the transaction closes.
Frederick’s stock on the over-the-counter market jumped 6 cents Thursday afternoon to 26 cents a share.
Frederick’s consists of 112 retail stores, a catalog business and an online site. Earlier this month, Lynch said the company’s earnings for the first quarter ended Oct. 26 “reflect certain marketing and inventory challenges” that have been “associated with the financial limitations of the business over the past several years.”
For the quarter, Frederick posted a loss of $7.3-million, or 20 cents a share, compared with a loss of $5.2 million, or 13 cents, for the same quarter a year earlier.
Revenue slid 12.1% to $19.7 million while same-store sales fell 11.7%.
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