Advertisement
YOU ARE HERE: LAT HomeCollections

Clothing firm may go public

American Apparel plans to be acquired by a `blank check' company for $244 million.

December 19, 2006|Leslie Earnest and Claire Hoffman | Times Staff Writers

American Apparel Inc., a high-profile Los Angeles clothing maker and retailer known for its sexually provocative ads, is expected to announce today that it will be purchased by a New York investment firm for about $244 million in stock.

The deal with Endeavor Acquisition Corp. would make American Apparel a publicly traded company and could help fuel expansion of the manufacturer, which makes its clothes in Los Angeles with a mostly immigrant workforce.

As part of the deal, Endeavor plans to keep Chief Executive Dov Charney, 37, who is responsible for the company's controversial marketing campaign, according to two people who said they were familiar with the deal but not authorized to speak publicly until after the announcement.

As a sign that the proposed new owners intend to continue American Apparel's focus on its workers, Endeavor plans to reserve a $2.5-million bonus pool and about 2.7 million shares of Endeavor stock for the clothing maker's employees, one of the sources said.

A spokesman for Endeavor declined to comment on the deal Monday. Endeavor was formed last year as a "blank-check company," with the sole objective of buying other companies. It raised $120 million in an initial public stock offering.

A purchase of American Apparel would be the first acquisition for Endeavor, which is headed by President Jonathan J. Ledecky and Chairman Eric Watson, a New Zealand investor. Ledecky previously served as chairman of U.S. Office Products, which he took public in 1995. That business, which grew into a Fortune 500 company, was another acquisition-hungry company that grew by using stock to buy small family businesses in a strategy known as a rollup.

Other Endeavor board members include Kerry Kennedy, a daughter of Robert F. Kennedy and ex-wife of New York state Atty. Gen.-elect Andrew Cuomo; Edward J. Mathias, one of the founders of Carlyle Group, a Washington-based private equity firm; and Richard Y. Roberts, a former commissioner of the Securities and Exchange Commission.

American Apparel was founded in 1997. Its seven-story manufacturing plant near downtown Los Angeles has grown to be the nation's largest garment factory, and the company expects sales of about $275 million this year. It employs 5,500 people worldwide.

No changes are expected in the way the manufacturer operates, nor are any layoffs expected at the plant, said one of the people familiar with the deal.

Its massive manufacturing facility is emblazoned with the company's tagline: "Legalize L.A." It employs more than 3,500 workers who cut and sew more than 9,000 items daily. Workers are paid, on average, about twice the minimum wage. They also get subsidized healthcare, English lessons and other benefits.

Charney gives workers the day off each year for L.A.'s "May Day" march, even providing employees with T-shirts calling for rights for immigrants.

"I wouldn't even want to live in L.A. were it not for the immigrant flavor. Immigrants are Americans -- that's the point. They are future Americans. We need to embrace immigrants and say, 'Hey, this is what makes L.A. so exciting!' " Charney told a Times reporter in the spring as he watched hundreds of his staff members march past him.

The company, which sells casual clothing such as brightly colored sweatshirts and tiny leotards, has built its reputation through a tantalizing ad campaign, which often features young women, disheveled and in varying degrees of undress.

Behind the camera is often the CEO himself. Wild-eyed and hyper, Charney has helped catapult American Apparel into pop culture lexicon.

Although he has argued that he is simply open and embracing of his sexuality, that openness has offended others, including three employees who have filed sexual harassment charges.

One case was dismissed by a judge in Chicago, another settled in Los Angeles and the third is still pending.

Charney's mystique has helped shape the brand as the anti-Gap franchise for a generation of young people.

Under the deal, Endeavor would use 32 million restricted shares of its stock to acquire American Apparel and would assume $110 million in debt, said one of the people familiar with the accord.

Endeavor's common shares closed Monday at $7.55, down 2 cents, before word of the deal hit the market. The deal was first reported Monday in the online edition of the Wall Street Journal.

leslie.earnest@latimes.com

claire.hoffman@latimes.com

*

Times staff writer Abigail Goldman contributed to this report.

Advertisement
Los Angeles Times Articles
|
|
|