MANUFACTURING
Investors Want to Take Frederick’s of Hollywood Private
After years of being traded on the stock market, a group of shareholders is trying to convert decades-old lingerie company Frederick’s of Hollywood into a private company.
The Los Angeles–based retail chain announced on Sept. 30 that it received a non-binding proposal letter on Sept. 26 from HGI Funding, TTG Apparel, Tokarz Investments, Fursa Alternative Strategies and Arsenal Group to acquire, at a proposed price of 23 cents a share, all the outstanding shares of common stock not owned by the group.
The offer represents a 26 percent premium to the then trailing 10-day average closing prices of the company’s common stock.
HGI Funding is an affiliate of Five Island Asset Management and the current holder of the company’s series B convertible preferred stock. TTG Apparel is the holder of the company’s series A convertible preferred stock and, together with Tokarz Investments, owns approximately 25.9 percent of the company’s outstanding common stock shares.
Fursa and Arsenal are controlled by William F. Harley, a director of the company, and own approximately 43.5 percent of the outstanding shares of the company’s common stock.
The company’s board of directors has appointed Milton Walters, its sole independent director, to serve as the lead director in connection with the full board’s review and consideration of the proposed transaction.
Frederick’s of Hollywood, founded in 1947 by Frederick Mellinger, has been going through a tough financial time lately. For the third quarter, ending April 27, comparable-store sales were down 20.5 percent compared with last year. Total store sales decreased 23.6 percent to $14.5 million, and direct sales were down 16.7 percent to $8 million.
With other revenues, net sales slipped 22.8 percent to $23.3 million for the quarter. The company’s third-quarter net loss was $643,000, compared with net income of $3.3 million for the same period last year.
In recent years, Frederick’s of Hollywood has faced stiff competition from other purveyors of sexy lingerie, such as Victoria’s Secret.
Frederick’s of Hollywood operates 112 stores and also sells merchandise through its catalog and e-commerce site.
