The Special Committee of the Perry Ellis International, Inc.
(NASDAQ:PERY) (“Perry Ellis” or the “Company”) Board of Directors,
which is composed of the independent directors, today reiterated
its commitment to the George Feldenkreis transaction and its
intention to recommend that all Perry Ellis shareholders vote FOR
the Feldenkreis transaction.
As previously announced on June 16, 2018, Perry Ellis’ Board of
Directors, acting on the unanimous recommendation of the Special
Committee of independent directors and with the support of
independent financial and legal advisors, unanimously approved a
$437 million transaction to become a private company through an
acquisition led by George Feldenkreis. Under the terms of the
Feldenkreis merger agreement, Perry Ellis unaffiliated shareholders
will receive $27.50 per share in cash upon closing. The purchase
price represents a premium of approximately 21.6 percent to Perry
Ellis’ unaffected closing stock price on February 5, 2018, the
last trading day prior to George Feldenkreis announcing his
proposal to take the Company private.
In an effort to clarify a number of mischaracterizations made by
Randa in its July 16, 2018 letter and press release, the Special
Committee notes the following:
- 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,
2018 letter 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 million
of 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 1st is 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 $0.55 per 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 Florida law, 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 Perry
Ellis shareholders.
PJ SOLOMON is serving as financial advisor to the Special
Committee, Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Akerman LLP are serving as the Special Committee’s legal counsel,
and Innisfree M&A Incorporated is serving as the Company’s
proxy solicitor.
About Perry Ellis InternationalPerry Ellis
International, Inc. is a leading designer, distributor and licensor
of a broad line of high quality men's and women's apparel,
accessories and fragrances. The Company's collection of dress and
casual shirts, golf sportswear, sweaters, dress pants, casual pants
and shorts, jeans wear, active wear, dresses and men's and women's
swimwear is available through all major levels of retail
distribution. The Company, through its wholly owned subsidiaries,
owns a portfolio of nationally and internationally recognized
brands, including: Perry Ellis®, An Original Penguin® by
Munsingwear®, Laundry by Shelli Segal®, Rafaella®, Cubavera®, Ben
Hogan®, Savane®, Grand Slam®, John Henry®, Manhattan®, Axist®,
Jantzen® and Farah®. The Company enhances its roster of brands by
licensing trademarks from third parties, including: Nike® for
swimwear, Callaway®, PGA TOUR®, Jack Nicklaus® for golf apparel and
Guy Harvey® for performance fishing and resort wear. Additional
information on the Company is available at http://www.pery.com.
Safe Harbor StatementWe caution readers that
the forward-looking statements (statements which are not historical
facts) in this release are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on current expectations rather
than historical facts and they are indicated by words or phrases
such as “anticipate,” “believe,” “budget,” “contemplate,”
“continue,” “could,” “estimate,” “expect,” “guidance,” “indicate,”
“intend,” “may,” “might,” “plan,” “possibly,” “potential,”
“predict,” “probably,” “proforma,” “project,” “seek,” “should,”
“target,” or “will” or the negative thereof or other variations
thereon and similar words or phrases or comparable terminology.
Such forward-looking statements include, but are not limited to,
statements regarding Perry Ellis’ strategic operating review,
growth initiatives and internal operating improvements intended to
drive revenues and enhance profitability, the implementation of
Perry Ellis’ profitability improvement plan and Perry Ellis’ plans
to exit underperforming, low growth brands and businesses. We have
based such forward-looking statements on our current expectations,
assumptions, estimates and projections. While we believe these
expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, and other
factors that may cause actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements, many of which are beyond our control. These factors
include: general economic conditions, a significant decrease in
business from or loss of any of our major customers or programs,
anticipated and unanticipated trends and conditions in our
industry, including the impact of recent or future retail and
wholesale consolidation, recent and future economic conditions,
including turmoil in the financial and credit markets, the
effectiveness of our planned advertising, marketing and promotional
campaigns, our ability to contain costs, disruptions in the supply
chain, including, but not limited to these caused by port
disruptions, disruptions due to weather patterns, our future
capital needs and our ability to obtain financing, our ability to
protect our trademarks, our ability to integrate acquired
businesses, trademarks, trade names and licenses, our ability to
predict consumer preferences and changes in fashion trends and
consumer acceptance of both new designs and newly introduced
products, the termination or non-renewal of any material license
agreements to which we are a party, changes in the costs of raw
materials, labor and advertising, our ability to carry out growth
strategies including expansion in international and
direct-to-consumer retail markets, the effectiveness of our plans,
strategies, objectives, expectations and intentions which are
subject to change at any time at our discretion, potential cyber
risk and technology failures which could disrupt operations or
result in a data breach, the level of consumer spending for apparel
and other merchandise, our ability to compete, exposure to foreign
currency risk and interest rate risk, the impact to our business
resulting from the United Kingdom’s referendum vote to exit the
European Union and the uncertainty surrounding the terms and
conditions of such a withdrawal, as well as the related impact to
global stock markets and currency exchange rates; possible
disruption in commercial activities due to terrorist activity and
armed conflict, actions of activist investors and the cost and
disruption of responding to those actions, and other factors set
forth in Perry Ellis’ filings with the Securities and Exchange
Commission. Forward-looking statements also may include information
concerning the proposed merger transaction, including unexpected
costs or liabilities, delays due to regulatory review, failure to
timely satisfy or have waived certain closing conditions, failure
to obtain the financing for the merger, the commencement of
litigation relating to the merger, whether or when the proposed
merger will close and changes in general and business conditions.
Investors are cautioned that all forward-looking statements involve
risks and uncertainties and factors relating to the proposed
transaction, including those risks and uncertainties detailed in
Perry Ellis’ filings with the SEC, all of which are difficult to
predict and many of which are beyond Perry Ellis’ control. You are
cautioned not to place undue reliance on these forward-looking
statements, which are valid only as of the date they were made. We
undertake no obligation to update or revise any forward-looking
statements to reflect new information or the occurrence of
unanticipated events or otherwise.
Important Additional Information And Where To Find
ItThe 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 U.S. Securities and Exchange Commission
(the “SEC”) in connection with any such solicitation of proxies
from Company stockholders. COMPANY STOCKHOLDERS ARE STRONGLY
ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND ACCOMPANYING WHITE
PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN
IMPORTANT INFORMATION. Information regarding the ownership of the
Company’s directors and executive officers in Company stock,
restricted stock and options is included in their SEC filings on
Forms 3, 4, and 5, which can be found through the Company’s website
(http://investor.pery.com), or through the SEC’s website at
www.sec.gov. Information can also be found in the Company’s other
SEC filings, including the Company’s Annual Report on Form 10-K for
the year ended February 3, 2018, the Form 10-K/A filed by the
Company with the SEC on June 1, 2018, and the preliminary proxy
statement filed by the Company with the SEC on July 11, 2018. More
detailed and updated information regarding the identity of
potential participants, and their direct or indirect interests, by
security holdings or otherwise, will be set forth in the proxy
statement and other materials to be filed with the SEC in
connection with the proposed transaction. Stockholders will be able
to obtain any proxy statement, any amendments or supplements to the
proxy statement and other documents filed by the Company with the
SEC for no charge at the SEC’s website at www.sec.gov. Copies will
also be available at no charge at the Company’s website at
http://investor.pery.com, by writing to Perry Ellis International,
Inc., at 3000 N.W. 107 Avenue, Miami, FL 33172.
Certain Participant InformationIn 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 Perry Ellis are deemed to
be participants in the solicitation of proxies from Perry Ellis’
shareholders in connection with the proposed transaction and, as of
the date hereof, beneficially own the amount of shares of Perry
Ellis’ common stock, $0.01 par value per share, indicated adjacent
to his or her name: (i) Perry Ellis directors: Joe Arriola (15,590
shares), Jane E. DeFlorio (22,710 shares), George Feldenkreis
(1,716,862 shares), Oscar Feldenkreis (1,223,329 shares), Bruce J.
Klatsky (21,723 shares), Michael W. Rayden (21,723 shares), and J.
David Scheiner (26,205 shares), and (ii) Perry Ellis executive
officers and other employees: David Enright (31,706 shares), Jorge
Narino (14,988 shares), Stanley Silverstein (73,666 shares) and
John Voith (64,624 shares). The business address for each person is
c/o Perry Ellis International, Inc., 3000 N.W. 107th Avenue, Miami,
FL 33172. More detailed and updated information regarding the
identity of potential participants, and their direct or indirect
interests, by security holdings or otherwise, will be set forth in
the proxy statement, including the schedules and appendices
thereto, and other materials to be filed with the SEC in connection
with the proposed transaction.
Contacts
Investor: Innisfree M&A IncorporatedArthur
Crozier / Jennifer Shotwell / Scott
Winter212-750-5833orMedia: Joele Frank, Wilkinson
Brimmer KatcherEd Trissel / Sharon Stern / Jeff
Kauth212-355-4449
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