Cherokee Group Accepts Sweetened Takeover Offer
Cherokee Group, a fast-growing apparel and shoe concern based in Sunland, said Friday that it accepted a sweetened, $174-million takeover bid from an investor group that includes Cherokee executives.
However, the group does not include James P. Argyropoulos, Cherokee’s founder, chairman and biggest stockholder, who opposed the group’s latest offer of $14 a share.
Moreover, one of the group’s members said Argyropoulos, who owns 14.5% of Cherokee, indicated that he will make a competing bid.
Argyropoulos told Cherokee’s board recently “that even though he didn’t think it was an appropriate time to sell the company,” if the board accepted the group’s bid, “he intended to make an offer himself,” said Cary D. Cooper, Cherokee’s executive vice president. Cooper is a member of Green Acquisition Co., as the investment group is known.
Founded in 1973
Cherokee also said its agreement with Green allows Cherokee to seek higher offers elsewhere. But since late May, when Green first approached Cherokee, no other suitor has surfaced.
Argyropoulos, who would earn about $25 million before taxes if he sold his shares to Green, did not return a telephone call seeking comment.
The son of a Greek cobbler, Argyropoulos borrowed $700 in 1968 to start a shoe repair shop in West Los Angeles. He also made shoes, and as orders poured in, he founded Cherokee in 1973 as a shoe manufacturer.
But Cherokee’s big growth came after 1980, when the company began selling apparel, principally women’s casual clothing. In the year ended last Nov. 28, Cherokee earned $10.4 million on sales of $139.6 million; four years earlier it earned only $1.7 million on sales of $48.3 million. Apparel now accounts for more than 80% of Cherokee’s revenue.
Cherokee’s definitive agreement calls for the group to launch a tender offer of $14 a share in cash for up to 49.9% of Cherokee’s 12.4 million total shares outstanding. Each remaining share would be exchanged for about $12 in cash and bonds priced at $2.
After the agreement was announced, Cherokee’s stock closed at $12.875 a share, up 62.5 cents on volume of nearly 819,000 shares in over-the-counter trading.
Although Cherokee’s stock traded above $22 a share a year ago, Green’s offer is “a fair bid” considering that the stock stood at $8 a share in May and that current softness in the apparel industry “is going to result in a couple of down quarters of earnings for Cherokee,” said Edward F. Johnson of Johnson Redbook Services, a New York investment firm.
Green was organized by Deutschman & Co., a Los Angeles investment firm, and includes Cooper; Robert Margolis, Cherokee’s president and chief operating officer, and Jay L. Kester, marketing president for Cherokee’s apparel division. The group initially offered $12.50 a share, then $13, but both offers were rejected as inadequate by Cherokee’s outside directors.
As the bids were revised, it was clear that Argyropoulos and the rest of Cherokee’s management were at odds. Argyropoulos was not part Green’s initial offer, then he joined in the $13-a-share bid, only to drop out again days later.
The company has more than 20 company-owned or franchised stores in the United States and has said it wants 100 stores operating nationwide by 1991.