Directors at Anaheim-based Pacific Sunwear of California Inc. on Tuesday called a planned board battle by a takeover-minded shareholder a waste of time and money and said they back efforts by the retailer’s chief executive to turn around the business.
“We will do all that is necessary to protect shareholders,” lead director Peter Starrett wrote in a letter to Ilia Lekach, chief executive of Miami’s Adrenalina Group.
The response sets the stage for a battle over Pacific Sunwear’s board at the company’s upcoming annual meeting. A date for the meeting hasn’t been set yet. Last year, Pacific Sunwear held it in April.
Last week, Adrenalina said it plans to nominate four candidates for Pacific Sunwear’s board as part of a bid to buy the struggling surf-inspired mall store chain.
Adrenalina runs what it calls “extreme stores” that sell clothes and sports equipment. Like Pacific Sunwear, the stores sell clothes from many of Orange County’s surf-inspired clothing makers.
The company’s three stores are in Florida. They feature an indoor surfing ride.
Adrenalina’s shares trade on the low-profile Bulletin Board exchange with a recent market value of about $5 million.
Pacific Sunwear runs about 930 stores and had a recent market value of about $100 million.
Adrenalina has made several offers to buy Pacific Sunwear, the last one for $330 million in October. All were rejected.
Some analysts have downplayed the Adrenalina offer, questioning whether the company has the financing to pull off an acquisition.
Pacific Sunwear has seen its shares fall about 90% in the past year as the retail downturn takes a toll on the company.
“Your decision to initiate a proxy contest is unfortunate, as it’s in shareholders’ best interests for the company to dedicate its financial, management and other resources exclusively to the important task of operating our business,” said director Starrett in his letter to Adrenalina.
Starrett, who’s also a retail consultant, said the board supports Chief Executive Sally Frame Kasaks and her recent efforts to restructure Pacific Sunwear.
“We firmly believe that these actions will enhance PacSun’s ability to weather the extraordinary challenges currently confronting the retail industry and to improve profitability,” Starrett said.
The directors also cast doubt about Adrenalina, citing operating losses and an independent auditor’s questions about its ability to continue as a “going concern,” the letter said.
“While we can understand how you and other Adrenalina shareholders may benefit from a combination with PacSun, we do not believe that such a merger would in any way be in the best interests of PacSun’s shareholders,” Starrett said.
Starrett also refuted Adrenalina’s claim to have the support of other Pacific Sunwear shareholders.
There was no immediate response from Adrenalina.
