Beeba’s Creations to Buy Back Equity Stake From J.C. Penney
Beeba’s Creations said it has reached an understanding with J.C. Penney to repurchase the 23% equity stake it sold to the giant retailer three years ago--at one-third the original price.
Beeba’s Creations, an offshore manufacturer of trendy women’s clothing, will pay J.C. Penney about $6.5 million for the 1,025,995 shares that it sold to the retailer for $19.5 million in 1988. Beeba’s will pay J.C. Penney an average of $6.34 per share, considerably under the shares’ recent trading range.
Beeba’s Creations shares closed at $8.50 in over-the-counter trading Friday, up $.625 for the day.
The company contracts with foreign manufacturers to make mostly young women’s clothing that Beeba’s Creations imports and sells to a variety of U.S. retailers, including J.C. Penney, The Limited, Clothes Time and others.
The stock sale to J.C. Penney in 1988 was part of a deal whereby Beeba’s Creations agreed to help J.C. Penney set up a junior sportswear line called Mixit within 100 J.C. Penney stores. The Mixit sections have all opened, including a location in the North County Fair shopping mall in Escondido.
Beeba’s Creations’ chief financial officer Thomas Baumann said his company approached J.C. Penney about the repurchase and that J.C. Penney was willing to sell because the retailer, which ordinarily does not invest in its suppliers’ stock, had finished setting up the Mixit line.
“They had certain objectives they wanted us to help them with and now those have been completed,” Baumann said. “They are on their own with Mixit.” Beeba’s Creations will remain a supplier of J.C. Penney, he said.
Beeba’s Creations did not disclose how much of its revenue is generated by sales to J.C. Penney. According to its most recent annual report, Wal-Mart is the company’s single largest customer, accounting for slightly less than 20% of the San Diego-based company’s revenue last year.
The stock buyback is expected to be completed within two weeks, Baumann said, at which time the company will retire about 315,690 of the shares. The company will pay J.C. Penney with $2 million cash and a note due in April, 1992.
