Los Angeles–American Apparel has adopted a so-called “poison pill” stockholder rights plan aimed at warding off unwanted takeover attempts as the battle with ousted CEO Dov Charney intensifies.
The company said over the weekend that it had adopted a one-year stockholder rights plan designed to strengthen the ability of the board of directors to protect the company’s stockholders.
“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,” American Apparel said in a statement.“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.”
‘Contests It Vigorously’
The company recently suspended Charney as CEO and declared its intent to terminate him for cause based on an ongoing investigation of misconduct. The rights plan will limit the ability of any person or group, including Charney, from seizing control of the group without appropriately compensating all American Apparel stockholders.
American Apparel hired advisory firm Peter J. Solomon Company last week to ensure it has “adequate access to capital in the future at a reasonable cost.”
Meanwhile, American Apparel founder Charney has pledged to fight attempts to terminate his employment and says some shareholders want him to continue to lead the company.
Charney also believes the termination is “without merit” and has said he intends to “contest it vigorously.”
Company founder Charney who owns 47.2 million shares in American Apparel, a 27.2% stake in the company, revealed in a Securities and Exchange Commission filing that he intends to increase his stake.
Charney has worked out an agreement with a firm called Standard General, which is acquiring shares (at least 10% of those available), then lending Charney the money to buy them. The loan has an annual interest rate of 10% and has to be paid back in five years; Charney’s stock is collateral. (On its website, Standard General says its invests in companies that are “undergoing dramatic change or are faced with material events.”)
The board had turned down Charney’s move last Friday to hold a meeting of investors because he’d been suspended earlier, American Apparel said in a regulatory filing today. The board amended rules the next day to deny the ability for executives or shareholders to call a special meeting and extended the time needed to propose annual-meeting agenda items or director nominations.