Clinton Group: Private Equity Eyes Wet SealTuesday, July 31, 2012
A private equity firm is eyeing Foothill Ranch-based teen retailer Wet Seal Inc., according to one of the company’s major shareholders.
New York-based asset management firm Clinton Group Inc., which owns 4.71% of Wet Seal shares, sent a letter to the retailer’s board on Monday saying it is aware of one private equity firm that’s interested in the company, and has “reason to believe there are numerous others.”
“In light of that opportunity, we cannot sit idly by while this board hunts for yet another chief executive officer and another turnaround strategy for the headless company,” the Clinton Group said in a draft press release attached to Monday’s letter. “As we have noted, we believe the best course forward is to find a buyer.”
Clinton Group has its own private-equity arm, but didn’t indicate whether that’s the firm that’s interested in Wet Seal.
Wet Seal announced the firing of former Chief Executive Susan McGalla last week, which was followed up with a letter from Clinton Group less than a day later calling for the company’s sale.
Wet Seal operates 468 Wet Seal stores for teen girls and 82 Arden B stores for young women.
The company has struggled with a turnaround for several years now with both of the company’s divisions seeing declining same-store sales so far this year.
Clinton Group called for a strategic review of the company focused on Wet Seal’s sale in its letter yesterday to the board.
The firm said in its letter that it planned on sending out a press release calling for some or all board members to be removed if a sale was not considered.
Wet Seal then published Clinton Group’s draft press release along with all other communication between the company and the firm over the past several weeks along with a statement from the board.
“The Board of Directors is taking the necessary and prudent steps to stabilize the company’s performance and we are considering all options that will enhance shareholder value,” the board said in its statement. “We will not be pressured into making critical decisions about the company’s business strategy in an impractical and imprudent timeframe.”
Wet Seal established an Office of the Chairman, headed up by Chairman Hal Kahn with President and Chief Operating Officer Ken Seipel and Chief Financial Officer Steve Benrubi serving as members and co-principal executive officers while the search for a new chief executive is underway.
The Wet Seal board said in its statement that it is currently working on a plan to “address the current issues, strengthen the company’s performance and enhance shareholder value.”
That plan will be discussed Aug. 21 during the company’s quarterly earnings call.
Wet Seal shares were generally flat at $2.74 in midday trading to a market value of about $247 million.