Minnow nips at whale: Tiny Adrenalina bids for PacSun

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Beaten-down shares of Pacific Sunwear of California Inc. popped as high as $4.10 early today on news that the Anaheim retailer had gotten an unsolicited cash-and-stock takeover offer valued at $4.50 a share, or nearly $300 million.

But the stock fell back to close at $3.80, up 18 cents from Friday, after the market took a closer look at the bidder, tiny Miami-based retailer Adrenalina.

For starters, Adrenalina -- which bills itself as a ‘retail entertainment destination designed for extreme sports enthusiasts’ -- operates just three stores (all in Florida), although it says it has four more in the works.

The company had sales of $2.3 million in the first half of this year, and recorded a loss of $4.3 million in the period because of heavy expenses, including $1.1 million in interest costs on debt.

Pacific Sunwear, by contrast, had sales of $580 million in its fiscal first half and an operating loss of $8.3 million. The company operates more than 900 stores in 50 states.

Adrenalina has one thing PacSun doesn’t: Each store is equipped with a FlowRider wave machine to draw traffic.

Ilia Lekach, Adrenalina’s CEO, wrote in a letter to PacSun Chief Executive Sally Frame Kasaks that PacSun ‘would benefit greatly from the application of our proven entertainment retailing concept, which we believe will re-energize the performance of your stores.’

Lekach said he was publicly announcing the offer because PacSun has ‘repeatedly declined Adrenalina’s prior attempts to enter into discussions.’

PacSun may need help re-energizing its franchise, but probably not from 58-year-old Lekach, who before getting involved with Adrenalina was head of perfume maker Parlux Fragrances.

The Motley Fool has some interesting reading on Lekach and his history at Parlux, including antics aimed at boosting the stock price. Read it here.

As for Adrenalina, it went public last year by merging with a Nevada shell company. That’s never a comforting sign.

In an interview today, Lekach told me he was confident that private investors and institutions would supply the cash he’d need for the deal, although he offered no specifics.

After I noted that Adrenalina’s latest quarterly financial report to the Securities and Exchange Commission included a warning raising ‘substantial doubt about the company’s ability to continue as a going concern,’ Lekach dismissed that as a ‘standard note’ for a money-losing business.

And that’s supposed to be encouraging, somehow?

PacSun didn’t immediately respond to a request for comment on the offer.