Former American Apparel lender urges retailer to look at ‘strategic options’
Hedge fund Lion Capital has nominated one of its founders for a seat on the American Apparel Inc. board and is pushing the Los Angeles retailer to weigh “strategic alternatives,” presumably including a sale of the company.
The London-based Lion Capital holds warrants to buy 12% of the clothier’s stock, which allows it to nominate two directors. The hedge fund originally designated Lucky Brand Jeans co-founder Gene Montesano for a seat, but told American Apparel on Sunday it was switching to co-founder Lyndon Lea, according to a securities filing.
The hedge fund also asked the retailer to form a special committee to “evaluate” its options going forward and include Lea as a part of that group.
Those options could include a sale of the company. American Apparel said last week it had received a takeover offer from private equity firm Irving Place Capital, which was interested in bringing back former Chief Executive Dov Charney in some capacity.
The retailer has adopted a shareholder rights plan to ward off hostile takeovers. American Apparel is not interested in a sale, but hired investment bank Moelis & Co. to help evaluate any offers that come in, said a person close to the company.
Lion Capital, which was a former lender to American Apparel, continues to support Charney’s return to the clothing company he founded, according to a person familiar with the matter.
The investment firm nominated food executive Robert Mintz, a childhood friend of Charney’s, to the board this summer.
The switch in possible directors adds more drama to American Apparel, which is trying to forge a path forward after firing Charney amid allegations of inappropriate behavior, including misuse of company apartments and poor conduct with employees.
Last week, the retailer named Colleen B. Brown as chairwoman -- the first woman to lead the company’s board. Paula Schneider, a longtime retail executive, was named American Apparel’s first female CEO starting Jan. 5.
Shares of the company rose 2 cents, or 1.9%, to $1.08 on Monday.
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