Proxy Fight Might Be in Charlotte Russe's Future, Analyst Says
Charlotte Russe Holding Inc. recently announced a new management team to turn around the sagging fortunes of the San Diego–based juniors retailer. However, the beleaguered company may now have to deal with a proxy fight for control of the company in the next few months.
On Nov. 19, the Charlotte Russe board of directors issued a press release stating that a proposed transaction from KarpReilly Capital Partners and H.I.G. Capital LLC would not be in the best interests of Charlotte Russe.
The two private investment firms had bid to purchase 100 percent of company shares for $9 to $9.50 per share in an all-cash, all-equity transaction. However, the Charlotte Russe directors’ press release might not be the final word in this matter.
On Nov. 20, retail analyst Adrienne Tennant of FBR Capital Markets published a research note forecasting that KarpReilly might make another offer on the company in the near future. KarpReilly seems to be preparing to take over Charlotte Russe. It has engaged the consulting services of former Charlotte Russe Chief Financial Officer Daniel T. Carter and General Merchandising Officer Patti Shields. KarpReilly partner Allan Karp also served on Charlotte Russe’s board of directors from 1996 to 2007. He owns 5.68 percent of the retailer’s shares. In July, KarpReilly announced it had invested an undisclosed amount in Alhambra, Calif.–based contemporary label Trina Turk.
If KarpReilly does take an activist strategy with Charlotte Russe, the private investment firm might start in January when Charlotte Russe holds its annual shareholders meeting.
On Nov. 12, Charlotte Russe reported a fiscal fourth-quarter loss of $6.6 million. The same day, the company named a new management team to turn around the company’s fortunes. It will be headed by former Mervyns president John D. Goodman as the new Charlotte Russe chief executive.The company had been without a permanent management team since July 20, when former Chief Executive Mark Hoffman announced his retirement.
According to a statement from the company, the new management team will focus on redefining the store’s image and better identifying what the Charlotte Russe customer needs. The board of directors also called for a better merchandise assortment, as well as improving productivity of back-office support services. —Andrew Asch
