Three executives of Cherokee Group, who are part of an investor group trying to acquire the Sunland apparel maker for $174 million, denied allegations by Cherokee’s chairman that they plan to radically change what so far has been Cherokee’s successful business strategy.
Cherokee Chairman James P. Argyropoulos, who started the company in 1973, made the allegations two weeks ago in a federal lawsuit filed in Los Angeles. The suit seeks to block the other executives’ investor group, Green Acquisition Co., from proceeding with its takeover bid of $14 a share in cash and securities.
Last month, Cherokee’s board voted 5 to 2 to accept the offer but to solicit other bids as well. Argyropoulos and his twin brother, Arthur Argyris, were the two directors who dissented.
In court filings in response to Argyropoulos’ suit, the three Cherokee executives--Robert Margolis, president; Cary D. Cooper, executive vice president, and Jay L. Kester, head of Cherokee’s apparel division--denied all of Argyropoulos’ allegations, including his assertion that Green’s offer attempts to coerce Cherokee stockholders into accepting an unfairly low price.
They also filed a counterclaim against Argyropoulos, alleging that he violated securities laws by, among other things, failing to make required disclosures to the Securities and Exchange Commission.
Intentions Not Disclosed
The trio alleged that Argyropoulos and others plan to acquire control of the company by supposedly launching a counteroffer but didn’t disclose those intentions as required in a filing with the SEC.
Argyropoulos is Cherokee’s biggest shareholder with a 14.5% stake.
Argyropoulos’ lawyer, J. Michael Hennigan, said the trio’s countersuit was frivolous.
Margolis, Cooper and Kester also sent a letter to Cherokee’s stockholders, employees and customers emphasizing that they have “no plans for any radical restructuring of Cherokee’s business” if the takeover succeeds.
Argyropoulos had predicted in his suit that if Margolis took command of Cherokee, he would make major changes--such as stepping up sales to discount retailers--that would erode Cherokee’s profit margins.