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Tiny Adrenalina bids on PacSun

October 21, 2008|Tom Petruno | Petruno is a Times staff writer.

Beaten-down shares of Pacific Sunwear of California Inc. jumped as much as 13% early Monday on news of a $300-million, unsolicited takeover offer for the Anaheim retailer.

But the stock quickly retreated, closing up 5% from Friday, after the market took a closer look at the bidder, Miami-based retailer Adrenalina.

For starters, Adrenalina -- which bills itself as a "retail entertainment destination designed for extreme sports enthusiasts" -- operates just three stores, all in Florida, although it says it has four more in the works.

The company had sales of $2.3 million in the first half of this year and recorded a loss of $4.3 million in the period because of heavy expenses, including $1.1 million in interest costs.

Pacific Sunwear, by contrast, had sales of $580 million in its fiscal first half and an operating loss of $8.3 million. The company operates more than 900 stores in 50 states.

Adrenalina has one thing PacSun doesn't: Each store is equipped with a FlowRider wave machine to draw traffic.

Ilia Lekach, Adrenalina's chief executive, wrote in a letter to PacSun CEO Sally Frame Kasaks that PacSun "would benefit greatly from the application of our proven entertainment retailing concept, which we believe will re-energize the performance of your stores."

Lekach said he was disclosing the offer because PacSun had "repeatedly declined Adrenalina's prior attempts to enter into discussions."

PacSun may need help re-energizing its franchise, but probably not from 58-year-old Lekach, who before getting involved with Adrenalina was head of perfume maker Parlux Fragrances.

At Parlux, Lekach said in June 2006 that he planned to take the company private, only to withdraw the offer a month later.

As for Adrenalina, it went public last year by merging with a Nevada shell company. That's never a comforting sign.

In an interview, Lekach said he was confident that private investors and institutions would supply the cash he'd need for the deal, although he offered no specifics.

After I noted that Adrenalina's latest quarterly financial report to the Securities and Exchange Commission included a warning raising "substantial doubt about the company's ability to continue as a going concern," Lekach dismissed that as a "standard note" for a money-losing business.

And that's supposed to be encouraging, somehow?

PacSun didn't respond to a request for comment on the offer, which Adrenalina valued at $4.50 a share. PacSun shares closed at $3.80, up 18 cents.


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