Endeavor to buy American Apparel

Tuesday, December 19, 2006; 10:37 AM

NEW YORK (Reuters) - American Apparel, known for its casual cotton clothing and provocative advertising, has agreed to be bought by Endeavor Acquisition Corp. (EDA.A) in a deal that will effectively allow the retailer to list shares on an exchange without doing a public offering.

American Apparel Chief Executive Dov Charney, who founded the company, will remain in that position and the combined entity will operate as American Apparel.

The apparel retailer, also known for making its T-shirts and other clothes in Los Angeles at a time most apparel companies have moved their manufacturing overseas, is expected to trade publicly on the American Stock Exchange or another national stock exchange though a time frame was not specified.

The deal with Endeavor, a publicly traded company formed specifically to make acquisitions, is worth about $244 million and will help fund the garment maker's expansion, the companies said on Tuesday.

"We look forward to ... (helping) the company achieve growth through the access to capital this transaction provides," said Endeavor President Jonathan Ledecky, in a statement.

Shares of Endeavor rose 87 cents, or 11 percent, to $8.45.

Ledecky has led a slew of business initiatives, including the launch of an small business office supply company U.S. Office Products in 1994, which later filed for bankruptcy after Ledecky left. In the late 1990s he also headed building management company Building One Service Corp.

Endeavor went public in December of last year and the IPO, including an overallotment option, generated about $130 million for the company. Special purpose acquisition companies are often called blank check companies because shareholders don't know what the company plans to buy when it first goes public.

American Apparel will get 32.3 million shares of restricted Endeavor stock. Endeavor's shares closed at $7.58 on Monday.

Endeavor will also assume $110 million of debt, create a merger bonus pool of $2.5 million and reserve as many as 2.7 million additional shares for American Apparel employees.


American Apparel company calls itself the largest garment factory and T-shirt manufacturer in the United States and has 143 retail locations in 11 countries.

"This is an exciting time for American Apparel -- acquiring the necessary financial foundation will give us the opportunity to realize our bigger dreams," said Charney in a statement.

While still small, American Apparel is seen as a possible competitor to Gap Inc. (GPS.N), which operates the Gap chain of casual clothing stores in the United States and abroad. As of October 28, Gap operated 1,338 stores in North America.

In other apparel-related news, FOH Holdings Inc., the parent company of lingerie retailer Frederick's of Hollywood Inc., and apparel company Movie Star Inc. (MSI.A) said on Tuesday they agreed to merge.

Under terms of the deal, known as a reverse merger, Frederick's shareholders will get 23.7 million shares of newly issued Movie Star stock, worth $30.6 million, based on Monday's closing price of $1.29.

Shareholders of privately held Frederick's will then own 60 percent of the combined publicly traded company, which will be called Frederick's of Hollywood Group Inc.

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