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Majority Shareholder Bids to Take Frederick’s of Hollywood Private
After years of losing money, executives at lingerie retailer Frederick’s of Hollywood Group said they have accepted an offer to take the company private.
Frederick’s of Hollywood announced on Dec. 19 that it has entered into a definitive merger agreement with HGI Funding LLC, a subsidiary of Harbinger Group Inc., and several of the retailer’s shareholders who collectively own 89 percent of the company’s stock. They are offering to purchase the remaining stock for 27 cents a share. This is up from an earlier offer of 23 cents a share. The stock closed at the end of Dec. 19 at 26 cents a share.
The deal values the company at about $10.6 million on 39.3 million shares outstanding.
Frederick’s of Hollywood executives said this deal is in the best interest of the company and has been approved by the board of directors. The lingerie retailer has been trying to take the company private for some time.
Thomas Lynch, currently chief executive of the retailer with 112 stores across the country, would stay on in that position and has signed a three-year contract.
Following the announcement, Tripp Levy PLLC, a securities and shareholder-rights law firm in New York, said it is investigating the acquisition of Frederick’s of Hollywood. The investigation concerns whether Lynch, William Harley, and other members of the senior management and board breached their fiduciary duties to shareholders by not engaging in a full and fair process to insure shareholders received the maximum value for their shares while seeking to benefit themselves for their own self interests.
For fiscal 2013, Frederick’s of Hollywood, started shortly after World War II by Frederick Mellinger, had net losses of $22.5 million on $86.5 million in revenues. For fiscal 2012, the company had $6.4 million in net losses on $111.4 million in revenues.
