Frederick's of Hollywood Group Inc. on Thursday said that its board has accepted an offer to be taken private by a group led by its largest shareholder, Harbinger Group Inc. The acquisition deal values the lingerie retailer at $10.6 million and is the latest attempt to save its floundering business. Once the deal closes, Frederick's of Hollywood will be privately held and no longer traded on the OTCQB marketplace.
Harbinger's HGI Funding LLC and other shareholders, who already have an 89 percent stake in the company, will offer the remainig holders 27 cents a share when the deal is closed. The company said that Frederick's CEO, Thomas Lynch, will continue to serve as chief executive for three years after the merger.
Frederick's has made several attempts to keep its business afloat. The company has posted losses during 13 of the past 14 quarters, most recently reporting a $7.28 million loss for the first quarter ended Oct. 26. Frederick's shuttered six failing stores this year as it continues to face tough competition from market leader Victoria's Secret. The lingerie company also has recorded inventory losses as new product lines fail to connect with customers.
Frederick's, which was founded in 1947 by the creator of the push-up bra, Frederick Mellinger, announced that it was looking for a buyer in May 2012, when it hired Allen & Co. LLC as financial adviser to evaluate its options after receiving a number of inquiries related to various transactions. As of Oct. 26, Frederick's had cash and cash equivalents of just $250,000, while total debt amounted to about $24.9 million.
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