LOS ANGELES--(BUSINESS WIRE)--
American Apparel, Inc. (NYSE MKT: APP) today announced that a special
committee of its Board of Directors has adopted a one-year stockholder
rights plan that is designed to strengthen the ability of the Board of
Directors to protect the Company's stockholders.
The Company's stockholder rights plan was adopted in response to reports
of rapid accumulations of the Company's outstanding common stock. The
special committee believes this plan is an important tool to ensure that
all American Apparel stockholders are treated fairly. This decision was
made in the context of today's SEC filing by Dov Charney in which he
expressed an intent to acquire control or influence over the Company.
The Board of Directors previously suspended Mr. Charney as CEO and
declared its intent to terminate him for cause based on an ongoing
investigation of misconduct. The rights plan is designed to limit the
ability of any person or group, including Dov Charney, to seize control
of the Company without appropriately compensating all American Apparel
stockholders. It is intended to provide the Board of Directors and
stockholders with time to make informed judgments. It does not affect
trading by passive investors, as it allows such investors to accumulate
as much as 15% of the Company's common stock and has no impact on a
takeover proposal for the entire company acceptable to the holders of a
majority of the Company's shares.
Initially, the rights will be attached to all shares of common stock and
be represented by the certificates representing the common stock. Each
right entitles the holder to purchase one ten-thousandth of a share of
preferred stock at an exercise price of $2.75, subject to adjustment as
provided in the rights plan. Upon the occurrence of certain events, the
rights may separate from the common stock. Until such separation occurs,
if at all, outstanding stock certificates (or, in the case of shares
reflected on the direct registration system, the notations in the book
entry accounts) will represent both shares of the Company's common stock
and the rights. The rights distribution is not taxable to stockholders.
Stockholders are not required to take any action to receive the rights
distribution. The rights will expire at 5:00 P.M. (New York City time)
on June 27, 2015, unless such date is extended or the rights are earlier
redeemed, exchanged or terminated.
The Company’s rights plan is similar to other plans adopted by publicly
held companies. If a person or group acquires 15% or more beneficial
ownership of the Company’s common stock, such person will be deemed to
be an “Acquiring Person.” If any person or group already beneficially
owns 15% or more of the Company’s common stock as of this announcement,
such person or group will not be deemed to be an “Acquiring Person”
unless such person acquires an additional 1% of the Company’s common
stock. The definition of “beneficial ownership” includes derivative
Under the terms of the rights plan, Dov Charney will not be deemed to
“beneficially own” any of the securities beneficially owned by Standard
General L.P. (“SG”), as referenced in Amendment No. 13 to the Schedule
13D dated December 12, 2007, filed by Mr. Charney on June 27, 2014,
solely by reason of the letter agreement dated June 25, 2014, between
Dov Charney and SG (the “Letter Agreement”). However, Mr. Charney will
be deemed to “beneficially own” all such securities beneficially owned
by SG upon either (i) entry into the definitive loan documents
contemplated by the Letter Agreement, (ii) entry into the cooperation
agreement contemplated by the Letter Agreement, (iii) any purchase of
securities by Mr. Charney from SG following execution of the Letter
Agreement or (iv) entry into any other agreement, arrangement or
understanding with SG which would otherwise give Mr. Charney beneficial
ownership of the securities beneficially owned by SG.
In the event that a person becomes an “Acquiring Person,” except
pursuant to a qualifying offer for all outstanding shares of common
stock which the Board of Directors determines to be fair and not
inadequate and to otherwise be in the best interests of the Company and
its stockholders, each right will entitle its holder to purchase, for
$2.75 per share, a number of shares of the Company’s common stock or
substantially equivalent securities having a market value of twice such
price. In addition, following certain transactions such as a merger or
other business combination in which the Company is not the surviving
corporation, each right will entitle its holder to receive, upon
exercise, common stock of the acquiring company having a value equal to
two times the exercise price of the right.
At any time prior to 10 business days following a public announcement
that a person has become an “Acquiring Person,” the Company may redeem
the rights in whole, but not in part, at a price of $.001 per right.
Immediately upon the action of the Board of Directors ordering
redemption of the rights, the rights will terminate and the only right
of the holders of rights will be to receive the $.001 redemption price.
The special committee of the Board of Directors adopted the rights plan
following evaluation and consultation with outside financial and legal
experts. The rights plan is not intended to prevent or deter take-over
bids that offer fair treatment and value to all stockholders. Rather,
the rights plan is intended to protect stockholders from any threat of
creeping control, provide the Board and stockholders with adequate time
to properly assess a take-over bid without undue pressure, and provide
them with adequate time to fully assess an unsolicited take-over bid. In
the case of such an unsolicited take-over bid, the rights plan is
intended to allow competing bids to emerge, and will permit the Board to
explore other value-enhancing alternatives, all with the objective of
maximizing stockholder value.
The rights plan and a summary of its terms will be filed with the
Securities and Exchange Commission in a Form 8-K.
About American Apparel
American Apparel is a vertically integrated manufacturer, distributor,
and retailer of branded fashion basic apparel based in downtown Los
Angeles, California. As of May 31, 2014, American Apparel had
approximately 10,000 employees and operated 249 retail stores in 20
countries, including the United States, Canada, Mexico, Brazil, United
Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands,
Spain, Sweden, Switzerland, Australia, Japan, South Korea, and China.
American Apparel also operates a global e-commerce site that serves over
60 countries worldwide at http://www.americanapparel.com.
In addition, American Apparel operates a leading wholesale business that
supplies high quality T-shirts and other casual wear to distributors and
This press release, and other statements that the Company may make, may
contain forward-looking statements. Forward-looking statements are
statements that are not historical facts and may include statements
regarding, among other things, the future effects of the rights plan.
Such statements are based upon the current beliefs and expectations and
are subject to risks and uncertainties which could cause actual results
and/or the timing of events to differ materially from those set forth in
the forward-looking statements. More detailed information about these
and other factors are detailed in the Company's filings with the
Securities and Exchange Commission, including the Company's Annual
Report on Form 10-K for the year ended December 31, 2013 and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2014. The Company's
filings with the SEC are available at www.sec.gov.
You are urged to consider these factors carefully in evaluating the
forward-looking statements herein and are cautioned not to place undue
reliance on such forward-looking statements, which are qualified in
their entirety by this cautionary statement. The forward-looking
statements speak only as of the date on which they are made and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
Source: American Apparel, Inc.