Key Player Not Decided About Cherokee Sale
A $155-million offer to buy Cherokee Group, the fast-growing North Hollywood women’s clothing and shoe company, involves three of the company’s top executives, but the company’s founder and biggest stockholder has yet to agree to the deal.
On Wednesday, Green Acquisition Co., a new entity that is part of the Los Angeles investment firm Deutschman & Co., offered $12.50 a share for Cherokee’s stock. The stock, which had been trading at $8 a share before the announcement, closed Thursday at $12, down 12.5 cents for the day.
Green said it had options to purchase holdings in Cherokee held by three executives: Robert Margolis, Cherokee’s president; Cary Cooper, chief financial officer, and Jay Kester, marketing president of Cherokee’s apparel division. Green said that Margolis would become chief executive of the new company and Cooper and Kester would hold other management posts. Drexel, Burnham, Lambert would provide financing for the deal.
The Cherokee board of directors is scheduled to meet Friday to discuss the offer.
It remains unclear whether James Argyropoulos, 44, Cherokee’s chief executive, will accept Green’s offer to become an investor in the takeover and to become a director and a consultant in the new company.
Margolis said Wednesday: “We all talked about the possibilities of buying the company. This was not behind his back,” referring to Argyropoulos. “We’re hoping he’s with us.”
Talking With Chief
Twenty years ago, Argyropoulos borrowed $700 to start a shoe shop in Venice. That was the forerunner of Cherokee, which for the fiscal year ended Nov. 28, turned a $10.4-million profit on sales of $139.6 million.
Everett Clayton, a partner at Latham & Watkins, Deutschman’s law firm, said his group has been talking to Argyropoulos for several weeks. “Mr. Argyropoulos has been kept apprised of every step.”
Asked what would happen if Argyropoulos turned down Green’s offer to join forces, Clayton said: “We’ve made a proposal to buy the company. We have agreements with other managers. We’d like to have him on board. But if he is not, we’ll proceed.”
Argyropoulos did not return a reporter’s phone calls Thursday.
Argyropoulos controls 14.5% of Cherokee’s stock while his twin brother Arthur controls another 1.6%. Given the size of the brothers’ holdings, Thomas Caraisco, a financial analyst with Henry F. Swift & Co. in San Francisco, said it was possible they would try to make a counteroffer or to block the takeover bid.
According to a May proxy statement, Margolis, Cooper and Kester own or control only 2.3% of the company’s 12.4 million shares of stock. But the trio holds options for another 824,300 shares.
