A hedge fund has launched an unsolicited $64 million bid for Christopher & Banks, the struggling, Plymouth-based women’s clothing retailer.
Glen Stubbe, Star Tribune
Fund tries again to buy Christopher & Banks
- Article by: JANET MOORE and ADAM BELZ
- Star Tribune s taff w riters
- July 3, 2012 - 10:26 PM
A hedge fund has launched an unsolicited $64 million bid for Christopher & Banks, the struggling, Plymouth-based women's clothing retailer.
Aria Partners, based in Los Angeles and Boston, offered to buy Christopher & Banks for $1.75 a share -- a 50 percent premium over the company's closing stock price Monday. News of the offer sent Christopher & Banks' shares soaring Tuesday -- closing at $1.39 a share, an increase of 20 percent.
In his letter to Christopher & Banks' board, Edward Latessa, partner of Aria Partners, wrote "the deterioration of enterprise value the current management team has wrought upon the company is unprecedented."
Latessa said a previous proposal to buy the firm on May 21 was "rebuffed." Aria Partners already owns a 4 percent stake in the retailer.
Late Tuesday, Christopher & Banks released a statement acknowledging receipt of the Aria Partners letter and indicating it would review the offer with the help of Piper Jaffray & Co. and Dorsey & Whitney, its financial and legal advisers.
The clothing chain, formerly named Braun's Fashions Corp., caters to women between ages 40 and 60 and has about 670 stores in 46 states, mostly in shopping malls. The company has 44 stores in Minnesota.
Christopher & Banks rose to prominence in the late 1990s by offering moderately priced, not-too-trendy fashions aimed at suburban soccer moms. But in recent years, the retailer has lost market share to competitors such as Dress Barn and Chico's. Internet fashion sales haven't helped either, said Marshal Cohen, an apparel expert at NPD Group, a consumer and retail market research firm in Port Washington, N.Y.
"Their competition has grown greater and broader, and at the same time the competition for the consumer dollar has grown greater and broader," Cohen said.
Cohen said Christopher & Banks has been good at retaining loyal customers, but not at attracting new ones.
"You have to continue to get new customers, and that's where they've fallen short," he said. "Women and men alike, they're not dressing their age anymore."
Those forces have translated into losses for Christopher & Banks in two of the past three fiscal years. The company lost $13.4 million in the first quarter of this year.
Aria's Latessa claimed that "in a few short years, the company has been reduced from a peak enterprise value of $600 million, to a mere $35 million today, With that enterprise value down by nearly 95 percent, isn't it time for a change?"
He also said the board's interests are not aligned with management's, citing nearly $1 million in board fees paid to directors who have "overseen a massive deterioration in profits."
In 2011, Christopher and Banks announced a restructuring that involves closing 100 underperforming stores. In addition, the company has launched a new strategy for this fall that involves reducing the number of styles, retooling product offerings, reducing price points and engaging in new promotional strategies. In May, the company hired retail veteran Joel Waller, formerly of Wilsons Leather, as chief executive officer.
But Latessa said in his letter, "Your company is losing money, has been losing money and currently has no credible plan to stem the losses and regain profitability. We believe we can fix this company and are willing to put up the capital, expertise and manpower to do it."
Aria Partners has previously invested in retailers Kenneth Cole, Barnes & Noble and Wet Seal. (Christopher & Banks' Waller was chief executive of Wet Seal from 2005 to 2008.)
When asked what the strategy might be for Christopher & Banks, an Aria Partners spokesman declined to comment.
Meanwhile, a New York law firm, Levi & Korsinsky, said Tuesday that it was investigating Christopher & Banks and its board for "possible breaches of fiduciary duty and other violations of state law in connection with the receipt of a merger proposal from Aria Partners."
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