Small retailer Adrenalina withdrew its offer to buy Anaheim-based Pacific Sunwear of California Inc. on Monday but said it plans to take a buyout offer directly to shareholders at the struggling surf-inspired retailer.
Pacific Sunwear rejected the offer, saying it wasn’t in the best interest of shareholders.
Adrenalina, which owns a stake in Pacific Sunwear, now says it plans to significantly increase its number of shares for a possible takeover.
Miami-based Adrenalina upped its bid to buy Pacific Sunwear for $329 million in October.
The company said it has discussed a possible buyout with some of Pacific Sunwear’s largest shareholders and has been met with support.
Adrenalina could look to replace Pacific Sunwear’s existing board members if the company’s plan is successful.
“Shareholder value at PacSun has continued to deteriorate at staggering levels over the past month,” Adrenalina chief executive Ilia Lekach wrote in a letter dated Nov. 20 to Pacific Suwnear Chief Executive Sally Frame Kasaks.
Pacific Sunwear “remains committed to executing on (its) strategic plan to create long-term shareholder value,” Kasaks wrote in a letter dated Monday to Lekach.
“We strongly disagree with your claim that your proposed business combination would be supported by a vast majority of our shareholders,” Kasaks wrote. “In fact, in our recent communications with our major shareholders, they have not expressed support for a business combination with Adrenalina.”
Pacific Sunwear has seen its stock fall about 90% for the year.
The company, which runs some 940 mall stores and outlets, has worked hard to rebuild itself after a series of fashion missteps and falling sales.
But the economic downturn hasn’t made a turnaround easy.
Pacific Sunwear saw sales at stores open at least a year fall 10% last month.
Adrenalina’s announcement comes after a sizable Pacific Sunwear shareholder sold most of its stake.
Los Angeles-based NWQ Investment Management Co. cut its stake in Pacific Sunwear to just a handful of shares from a 10.9% stake, according to a Nov. 28 regulatory filing.
The fund now owns 6,419 shares in the company, or less than 1%. It’s unclear why NWQ decided to sell.
It’s likely the fund wanted to cut its losses with Pacific Sunwear.
At the same time, other investors have sold off stakes in publicly held companies to meet the demands of their own investors who want to cash out of funds.
Pacific Sunwear shares closed up 5% at end of trading after falling more than 8% on a market value of about $100 million.
