Lawyers for Warnaco Inc. and a California investment group trying to acquire the apparel maker presented more than three hours of legal arguments Wednesday on a Warnaco move to block the attempted takeover in federal court.
Warnaco has asked U.S. District Judge Peter C. Dorsey to enjoin W Acquisition Corp. of Encino from commencing a $409-million tender offer for all of Warnaco’s outstanding shares.
The company claims that W Acquisition violated a variety of federal securities laws in making its bid for Warnaco. In a counterclaim, W Acquisition alleges that Warnaco violated state and federal securities laws in proposing a recapitalization in defense of the attempted takeover, which thwarted an earlier move by managers of Warnaco to take the company private in a leveraged buy-out.
Dorsey gave the parties until today to submit final briefs in the case; he is expected to decide by midnight Friday whether to issue an injunction. WAC has until then to withdraw its $40-per-share cash offer, which expires April 11.
Going Ahead With Plan
Even as its attorneys were arguing the case in court Wednesday, Warnaco announced that it intends to proceed with its proposed recapitalization.
The company said its counsel had given it an opinion that the plan is legal. Therefore, a Warnaco spokeswoman said, the company would proceed with the plan as scheduled. Pending disruption by any legal rulings, shareholders are scheduled to vote on the plan April 25.
Under Warnaco’s recapitalization, shareholders would receive $7 in cash, notes with a face value of $29 per share and stock in the recapitalized company. Warnaco has said it could raise the cash portion to $22 per share if it can sell the notes to outside investors.
The recapitalization was devised as a countermeasure to W Acquisition’s initial $367-million offer for Warnaco, a bid that hinges on the tender of 5.5 million, or 51%, of Warnaco’s shares. On Sunday, WAC responded to the Warnaco plan by raising its initial $36-per-share bid to $40 per share, or about $409 million.
At Warnaco’s valuation, the recapitalization would be worth $41 per share, or $418 million based on the company’s 10.2 million outstanding shares.
The WAC offer also had been conditioned on its obtaining financing for a takeover, but the investors said Tuesday that Drexel Burnham Lambert had given it a commitment for 100% of the cash offer.