St. John Knits Sale Closes

St. John Knits Inc. changed hands Wednesday as the founding Gray family and a New York investment firm closed a deal to buy the upscale women’s clothing company for $30 a share.

St. John’s stock ceased trading on the New York Stock Exchange on Wednesday. Shares closed Tuesday at $29.75, a three-month high.

An affiliate of New York-based Vestar Capital Partners now owns 78% of the newly structured company, St. John Knits International Inc., while Chief Executive Robert E. Gray and his family own about 15%. The public still holds about 7% of the Irvine-based company’s shares, which will trade on the low-profile over-the-counter market.

Gray announced in December that he wanted to buy the company so he could run it with less interference from Wall Street. Initially, Vestar and the Grays offered $28 a share, but they boosted the bid to $30. Shareholders voted to accept the offer last week.

As the transaction neared its close, the buyers faced some unexpected hurdles. Vestar kicked in an additional $25 million and the buyers increased their bank debt after a sale of junk bonds to help finance the deal attracted insufficient interest amid fears of rising interest rates.

The total cost, including fees and expenses, was about $534 million.

St. John has struggled with a rash of difficulties over the past year and has reported declines in earnings for the past three quarters.

When Gray announced the buyout offer, St. John’s stock was trading at about $22 a share, about half the price seven months earlier. It irked some shareholders who said the offer price did not reflect the company’s true value.

A shareholder lawsuit challenging the purchase is scheduled to go to trial Nov. 1.