One needs to step back and look at a few things and come to some conclusions:
From the WSJ:
American Apparel Inc. APP +3.40% moved to shore up its senior management by appointing a new interim chief executive and replacing its chief financial officer.
Scott Brubaker, an Alvarez & Marsal managing director, will serve as interim CEO while the maker of jeans and T-shirts searches for a permanent successor to Dov Charney, the company’s founder.
Mr. Charney was removed as CEO in June over allegations of misconduct. He is currently serving as a consultant at the company while a special board committee reviews the results of an investigation into allegations that he misused company funds and allowed nude photos to be published on the Internet of a former employee who had sued him alleging sexual harassment.
Mr. Charney’s lawyer has called the allegations baseless.
John Luttrell, American Apparel’s CFO and interim CEO since Mr. Charney’s removal, is leaving the company.
He will be succeeded as CFO by Hassan Natha, former CFO for Fisher Communications Inc., a media company that was acquired last year by Sinclair Broadcast Group Inc. SBGI +1.29%
Mr. Brubaker, who has worked with retailers Eddie Bauer and Spiegel, will be charged with stabilizing American Apparel, which has run short of funds as it bounced from one crisis to another.
The company was given a lifeline this summer when the hedge fund Standard General provided emergency financing that American Apparel used to pay off a loan that had come due as a result of Mr. Charney’s removal as CEO.
Mr. Brubaker affirmed his support for American Apparel’s philosophy of manufacturing in the U.S. and commitment to maintaining its manufacturing headquarters in Los Angeles.
Alvarez & Marsal was engaged by American Apparel in early September.
Why do this?
Why not name a permanent CEO? Why another “interim”? The company this summer said they would make a decision on CEO Charney in 30 days and none has come yet. Why? My bet is they are setting it up to be sold. Sooner rather than later…
Let’s look at it from the various stakeholder perspectives:
Brubaker:
Why would he take this if it is not permanent? Well, he works for Alvarez & Marsal so the reality is its no skin off his back to take the job. He does have a material stake in what happens here so holding down the fort until a sale can be accomplished is very much in his interest….
Standard General:
They have a claim on Charney’s 42% , the 1% they own plus the $25M loan open to the company. They want to see value realized. They are also taking a bath on their 10% stake in Radioshack as looks to be teetering on Chapter 11. They are in the stock cheap and any legitimate offer will be entertained. A quick buyout here for a decent price ($2 or more) minimizes the Radioshack pain pretty quick.
This is probably why they have not made a decision on Dov yet, it makes sense to let a potential buyer make that decision. He comes with many positives and negatives, depending on the outlook of the buyer, the negatives might not outweigh his cache. For a European buyer, both Dov’s behavior and the company’s ad campaign are not anywhere near as controversial as they are here. A US buyer might want him gone, it makes sense to wait until then to make a decision. Again this backs the “sooner rather than later” thesis
Buyers:
Why buy it? Well, the brand is not damaged at all and results, despite the incredible turmoil with Dov are improving. If we are being honest, what other quality names are out there that might be available for a decent price? There are plenty of cash rich buyers that could easily write a check for the company. LVMH is sitting on 3.2B EU as of June 30, and swallowing a brand like $APP would be easy and a nice fit in the stable of brands they own.
Fashion & Leather Goods
Louis Vuitton, Fendi, Donna Karan, Loewe, Marc Jacobs, Céline, Kenzo, Givenchy, Thomas Pink, Pucci, Berluti, and Rossimoda are the brands that form the fashion and leather goods business group. LVMH supports the growth of these brands by respecting their identity and their creative positioning. The Fashion and Leather Goods brands continued to expand their retail network.
In the US $PVH could make a run at $APP. They do not have the cash laying around LVMH does after taking a stake in Karl Lagefield in april but could easily handle a few hundred million more added to the debt side of the balance sheet
The Company’s portfolio of brands includes Calvin Klein, Tommy Hilfiger brands, Van Heusen, IZOD, Bass, ARROW and Eagle, which are owned brands, and Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, JOE Joseph Abboud, MICHAEL Michael Kors, Michael Kors Collection, CHAPS, Donald J. Trump Signature Collection, DKNY, Elie Tahari, Nautica, Ted Baker, J. Garcia, Claiborne, Robert Graham, U.S. POLO ASSN., Axcess and Jones New York, which are licensed, as well as various other licensed and private label brands. It designs and markets branded dress shirts, neckwear, sportswear and, to a lesser extent, footwear and other related products. Additionally, it licenses its owned brands over a range of products.
$VF has a similar cash position as $PVH but far more room on its balance sheet to make a deal. While they typically own brands sold in departments stores, adding an $APP to its roster would allow them to branch out into more fashionable lines.
The point of the exercise is that there are plenty of potential buyers for $APP. The exercise is good because when people are making decisions that seem out of touch with what you think they are doing (finding a new CEO to turn company around) it many times is because they may be planning something else (selling company?)…