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Rival Makes a Surprise Bid for Mossimo

Cherokee's $135-million cash-and-stock offer is a 13% premium over the clothing licensing company's tentative sale to Iconix Brand Group.

April 18, 2006|Josh Friedman | Times Staff Writer

Cherokee Inc. surprised rival clothing licensing company Mossimo Inc. on Monday with a $135-million buyout offer, hoping to scuttle the Santa Monica firm's tentative sale this month to Iconix Brand Group.

In a letter to Chairman Mossimo Giannulli and his fellow board members, Cherokee called its bid of $8.50 a share "financially and strategically" superior to the Iconix deal.

Cherokee said its unsolicited bid marked a 13% premium to New York-based Iconix's offer, and a 9% bump from Monday's closing stock price for Mossimo, which gained 2 cents to $7.81 before the offer was announced.

Mossimo, whose roots are in the Orange County surfer look, markets a variety of casual apparel exclusively through Target Corp. -- a relationship that sparked a previous dispute between the two licensing firms.

Cherokee also markets its apparel through Target as well as other retailers. The Van Nuys company says it introduced Mossimo to Target in 2000. It won an arbitration award in Los Angeles County Superior Court in 2003 granting it a 15% finder's fee from all of Mossimo's sales to the nationwide chain.

Cherokee Chief Financial Officer Richard Riopelle declined an interview request. In addition to Cherokee, the company's brands include Sideout and Carole Little. Executives from Mossimo and Iconix, whose brands include Joe Boxer and Candie's, could not be reached for comment late Monday.

The $135-million offer from Cherokee would give shareholders $6 in cash and $2.50 in Cherokee stock for each Mossimo share.

Under the Iconix deal announced April 3, Mossimo shareholders would get $4.25 in cash and $3.25 in Iconix stock, for a total of $119 million.

Under that agreement, however, Iconix would give shareholders $16 million more in stock -- bringing the deal's value to $8.50 a share -- if Iconix's stock price doesn't appreciate to a level that would equal that deal value within a year

Giannulli, Mossimo's founder and majority shareholder, started his business by selling volleyball shorts out of his Balboa Island garage in 1986. He owns 10.3 million shares in the company, according to regulatory filings, and stands to reap about $88 million in cash and stock under either deal.

Giannulli would join Iconix as creative director of the Mossimo brand under the April 3 accord but it was unclear whether he would have a role at Cherokee if its bid was successful.

At Mossimo's height in 1996, when its clothing was featured in major department stores, the share price reached $50. Its fortunes flagged with the company's expansion from beachwear to more elegant attire.

The company considered filing for bankruptcy protection in 2000. But it was revived by its deal with Target, which gave the discount retailer sole U.S. rights to sell Mossimo-branded goods. Mossimo said this month that the relationship with Target was extended through 2010.

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