Foothill Ranch, CA—Activist investor Clinton Group, Wet Seal’s second largest shareholder, revealed today it is exploring financing options to possibly takeover the young women’s retailer to make it private.
Wet Seal Inc. is in the midst of a turnaround effort, attempting to return to a fast-fashion merchandise approach much like rivals Forever 21 and Zara have used to successfully take market share away from Wet Seal and other teen retailers.
“The notion that the business is worth half of what it was worth in July because all the teenage retailers had a crummy back-to-school is crazy to us,” Clinton Group President Greg Taxin told Bloomberg News today. “We’re happy to pay a market premium to this number for sure.”
Clinton would prefer to work with a partner to take Wet Seal private and has had preliminary talks with private-equity firms as well as banks, Taxin said.
News of the hedge fund’s effort sent Wet Seal’s shares up as much as 7% in early trading today. The retailer, which purportedly has a market value of about $219 million, posted a 6% decline in its third quarter sales earlier this month as its loss widened. It also warned that its holiday season was off to a “challenging” start.
The Clinton Group has initiated a push to sales Wet Seal last year after it won four seats on the company’s board of directors. The hedge fund’s nominee now serves as chairman.
As of Dec. 17, Clinton Group and its affiliates hold an 8.1% stake in Wet Seal, up from 7.82% reported in September.
So far, Wet Seal executives have made no comment on the Clinton Group’s move.