Founder Joins in Bid : Investor Group Enhances Cherokee Takeover Offer

Cherokee Group received a sweetened, $161-million takeover bid Tuesday from an investor group that now includes James P. Argyropoulos, the founder and biggest stockholder of the Sunland-based apparel concern.

The group, which includes three other top Cherokee executives and the Los Angeles investment firm Deutschman & Co., offered $13 for each of Cherokee’s 12.4 million common shares outstanding.

Argyropoulos, 44, who started the company in 1973 and remains its chairman and chief executive, owns 14.5% of Cherokee’s stock. The three other executives own a combined 2.3% and hold options for an additional 6.6%.

In May, the investor group--which then did not include Argyropoulos--offered $12.50 a share at a time Cherokee’s stock was trading at $8 a share. But a panel of Cherokee’s outside directors, which included Argyropoulos’ twin brother Arthur P. Argyris, rejected the bid.

Argyris was president of the company’s shoe division until last February, but he remains a director. He also owns about 1.6% of Cherokee’s stock.

It was unclear why Argyropoulos was not part of the group originally, and Cherokee’s announcement Tuesday did not say why he had joined in the offer. Argyropoulos and the other executives did not return telephone calls requesting elaboration.

Deutschman President Jeffrey Deutschman declined comment on Argyropoulos’ decision, except to say his group has discussed the proposed buyout with Argyropoulos since before the first offer was made.

Earnings Soared

After the new offer was announced, Cherokee’s stock closed at $12 a share, up 25 cents, in over-the-counter trading.

In rejecting the first offer, the outside directors said $12.50 a share represented an “illusory” premium over the stock’s market value, because the stock had been depressed since last October’s market crash even though Cherokee continued to set profit records. Earlier in 1987, the stock had climbed as high as $24.50 a share.

In its fiscal year ended Nov. 28, Cherokee’s profit jumped 53% to $10.4 million, while sales climbed 34% to $139.6 million.

The directors also warned the Cherokee executives in the group “to take no further action of any kind” toward trying to buy the company. The three executives in the investor group besides Argyropoulos are Robert Margolis, Cherokee’s president; Cary Cooper, chief financial officer, and Jay Kester, marketing president of Cherokee’s apparel division.

Frank Podbelsek, who follows Cherokee for the investment firm Wedbush Securities in Los Angeles, suggested that the directors’ rejection of the first offer might have “stemmed from the fact that Argyropoulos was not involved in it. That may have changed now that he’s involved.”

Calls Offer Fair

But Podbelsek also questioned whether the 50-cent-a-share increase offered by the group would be enough to get approval from the outside directors, who plan to hire an investment firm to decide if the bid is fair to Cherokee’s stockholders.

“Going from $12.50 to $13 is a step in the right direction, but the question is, is that enough of an increase beyond what was clearly an unacceptable offer a month ago?” he said.

Deutschman said “we feel the offer we’ve put on the table is a fair offer to the shareholders and we certainly hope the board will concur.”

Cherokee traces its roots to 1968, when Argyropoulos, a Greek immigrant, borrowed $700 to start a shoe repair shop in West Los Angeles. The company’s major growth began in 1980, when Cherokee also began selling apparel.