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Warnaco to Reacquire Authentic Fitness

Apparel: $438.6-million stock swap proposal moves forward despite opposition by Authentic's biggest shareholder.

July 15, 1996|From Times Staff and Wire Reports

Authentic Fitness Corp., the Commerce-based maker of Speedo swimwear and fitness apparel, said Sunday that it agreed to be reacquired by Warnaco Group Inc. in a stock swap currently valued at $438.6 million.

But the buyout proposal, which sparked controversy a month ago when Warnaco first disclosed that it was mulling the deal, took on an added twist as the companies announced their agreement. They said the Authentic Fitness director who represents the company's biggest stockholder, Pentland Group Inc. of Britain, voted against the purchase.

The companies did not say why R. Stephen Rubin, Pentland's chairman, voted against it. But they said the transaction would be put to a vote of the full board of Pentland.

Warnaco, a New York-based producer of intimate apparel under brand names such as Warner's and Calvin Klein, said it agreed to swap 0.82 share of its stock for each of Authentic Fitness' 22.2 million common shares outstanding.

Based on Warnaco's closing price of $24.125 a share in New York Stock Exchange composite trading Friday, the deal would be valued at $19.78 per Authentic Fitness share.

Authentic Fitness' stock closed Friday at $17.25 a share on the NYSE, so Warnaco's offer represents a 15% premium over the trading price.

Warnaco on June 6 initially offered a stock swap that represented a 25% premium over Authentic Fitness' market price. Since then, the prices of both companies' shares have fallen steadily.

Both concerns are headed by Linda J. Wachner, who also holds equity stakes in the companies. She was part of the investor group that acquired Authentic Fitness from Warnaco in 1990.

Because she owns stock in each company, Warnaco's offer a month ago represented an immediate financial windfall for her, and it sparked criticism by some analysts that it also represented a conflict of interest.

She denied that, saying the deal was not about personal wealth but rather was a necessary way for Authentic Fitness to better finance an expansion of its retail stores, as well as achieve other benefits. Authentic Fitness, which also has a major plant in Van Nuys, currently has about 100 outlets.

In announcing the deal Sunday, the companies said that despite Rubin's vote, special committees of both companies' independent directors had received opinions from their investment bankers that the merger agreement is financially fair to the companies' stockholders.

Pentland, a marketer of sports and leisure clothing, owns nearly 26% of Authentic Fitness, and Wachner owns nearly 14%, according to the company's most recent proxy statement.

"We are disappointed in Mr. Rubin's negative vote," Robert D. Walter, chairman of Authentic Fitness' special committee, said in a statement.

The acquisition remains subject to approval by a majority of the stockholders of Authentic Fitness and Warnaco; special meetings for those votes are expected to take place in the fall. Wachner said she agreed to vote for the deal.

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