Kellwood board now backs Sun Capital takeover bid

Kellwood Co., which twice rejected a buyout bid from Sun Capital Securities Group, agreed today to a $542 million takeover by Sun Capital and is recommending that stockholders tender their shares.

The Town and Country-based apparel marketer agreed to the $21 per share deal after it received no higher offers. It said it believes a majority of stockholders plan to tender their shares by the tomorrow’s deadline at midnight eastern standard time.

The company was trading at $20.94, up 41 cents late in the morning on the New York Stock Exchange.

The merger agreement provides that Kellwood remove all impediments to the offer and that Sun Capital take possession of a majority of the company’s shares by tomorrow’s deadline. Sun Capital currently has an 11.4 percent stake in the company.

“We are prepared to commit substantial resources beyond the purchase price to build Kellwood’s business, and we will work closely with managment and employees at Kellwood to strengthen the company and develop its branded portfolio,” Jason Bernzweig, vice president of Sun Capital, said in a statement.

Shareholders who have tendered their shares before the expiration date will be paid promptly, Sun Capital said in a statement. Those who don’t will not receive payment until the merger has been completed, which could take several months.

The pact provides that once the shares are paid for in the tender offer, Sun Capital will take control of the Kellwood board of directors. Kellwood has also agreed to end the $60 million debt buyback offer that it announced last month.

“As a strong, private company, Kellwood will continue to execute on its strategic priority to position the company as a brand-focused marketing enterprise, Robert C., Skinner, J., chairman, president and chief executive, said in a statement.

Kellwood, once primarily known for Sag Harbor and other moderately priced labels, has been restructuring to cut costs and build its higher-priced clothing business. Recent acquisitions include Hanna Andersson Corp., maker of premium children’s wear; Vince, a high-end sportswear label; and Hollywould, an upscale line of shoes, apparel and accessories. It also recently sold its Smart Shirts private label menswear unit in order to drop capital-intensive manufacturing operations.

Sun Capital first made its buyout offer in September, then again in November. Sun Capital’s first offer for the apparel company came just after Kellwood’s shares hit $15.17, a seven-year low at the time.

Kellwood had initially rejected the offer saying it “significantly” undervalued the strength of its expanded portfolio of brands and opportunities for sales and earnings growth.

Sun Capital is an affiliate of Sun Capital Partners, a Boca Raton, Fla.-based private investment firm that focuses on leveraged buyouts and investments in market-leading companies.