Perry Ellis Special Committee Reiterates Commitment to George Feldenkreis Transaction
As previously announced on
In an effort to clarify a number of mischaracterizations made by Randa in its
- Randa’s proposal is highly-conditional, non-binding and insufficient in terms of value and certainty of the provided debt financing commitments, as well as the lack of evidence of sufficient cash equity on hand, as further highlighted below;
- Randa’s new sources and uses (first provided in the
July 16, 2018letter to the Special Committee) confirms that it has made virtually no progress on its financing since it failed to prevail in the sale process run by the Special Committee. Randa has failed to include any financing commitments for approximately $32 millionof newly proposed mortgage debt indicated as a source of funds and made the entire financing contingent on its level of cash, accounts receivable and inventory, assets upon which the Special Committee has conducted no diligence and into which the Special Committee has no visibility since Randa is a privately held company. Additionally, Randa has failed to provide any assurance that Randa’s equity owners would backstop any of the contingencies based on Randa’s operations;
- Randa’s claim that PJ Solomon told Randa that an equity partner was necessary at a meeting on
June 1stis false. In fact, as made clear in the Company’s preliminary proxy statement, filed on July 11, 2018, Randa took it upon itself to add an outside party as a potential source of equity to help minimize risk at least five days prior to such meeting; and
- Randa’s skepticism of the expected timeline to close the Feldenkreis transaction is unfounded, particularly given that the Company has already been granted early termination of the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Acts of 1976 and filed its preliminary proxy statement earlier this month. The Special Committee remains confident that it will be able to satisfy all other closing conditions in order to close the transaction in the second half of calendar year 2018.
Additionally, the proposal by Randa includes incremental conditionality and risks of delay and closing uncertainty that are not present in the Feldenkreis merger agreement, including, among other things:
- Randa has not committed to pay the break fee payable to George Feldenkreis up front and when due in the event the Company terminates the Feldenkreis merger agreement and enters into a merger agreement with Randa, leaving the Company shareholders to bear the expense of that break fee if Randa does not close a transaction (which would represent a loss to Company shareholders of approximately
$8.7 million(approximately $0.55per share), undermining the value of the slight price increase available to shareholders under the Randa proposal);
- Randa’s form of merger agreement is materially less favorable to the Company and its shareholders than the Feldenkreis merger agreement, including with respect to the following terms:
- expanding the circumstances under which fees may be payable to Randa in the event of a termination of the merger agreement;
- increasing the amount of the break fee payable by the Company and lengthening the period during which such higher fee may be payable if the merger agreement is terminated;
- requiring the Company to pay Randa’s expenses, up to a cap of 1% of equity transaction value, if Company shareholders vote down the Randa proposal or if the Company breaches the merger agreement in a manner which gives rise to a Randa termination right;
- placing substantial additional closing risk on the Company, in part because of the more onerous disclosure obligations and expanded Company representations and warranties and covenants;
- not offering appraisal rights to Company shareholders, which Randa could voluntarily provide under
Floridalaw, while the Feldenkreis merger agreement includes such recourse; and
- making waiver of change of control consent rights of third parties a pre-condition to execution of a merger agreement.
Another consideration in deciding whether to re-engage in negotiations with Randa is the fact that Randa has persistently violated the terms of its non-disclosure agreement with the Company despite receiving multiple warnings from the Special Committee’s advisors. While that agreement expressly permits Randa to make unsolicited proposals to the Company privately (and the Special Committee intends to dutifully continue to review any such proposals and consider whether exploring them is in the best interests of shareholders), the non-disclosure agreement expressly restricts Randa from making public statements or discussing its proposed merger transaction, or the Company’s business, with any of the Company’s business relations, including key licensors.
Based on the totality of the circumstances considered in comparison to the potential for a slight price improvement, the Special Committee again concluded that re-engaging with Randa at this time is not in the best interest of shareholders.
The Special Committee continues unanimously to believe that the Feldenkreis merger agreement is in the best interest of all
PJ SOLOMON is serving as financial advisor to the
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Important Additional Information And Where To Find It
The Company, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from Company stockholders in connection with the proposed transaction. The Company intends to file a proxy statement and WHITE proxy card with the
Certain Participant Information
In accordance with Rule 14a-12(a)(1)(i) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the following directors, executive officers and other employees of
Source: Perry Ellis International Inc.