Kellwood stock climbs on Sun Capital bid; Accredited Home to drop price in tender offer from Lone Star

By Sheri Kasprzak

New York, Sept. 18 - Kellwood Co. may be bought out by Sun Capital Securities Group, LLC, and the possibility sent shares of the apparel and consumer goods company up significantly.

The $21-per-share price tag is a 38.4% premium to Kellwood's $15.17 closing stock price from Tuesday - likely a very appetizing offering for Kellwood, one analyst said Wednesday.

That wasn't the only merger news in the pipeline Wednesday, though. After months of haggling, Accredited Home Lenders Holding Co. and Lone Star Fund V (US) LP finally agreed to drop the pending lawsuit and reduce the tender offer price of Accredited's shares to $11.75 each.

That news was good for Accredited's shares, and one sellside trader said he feels the agreement was the only way the merger could be completed.

The price, the sellside trader said, needed to come down for the deal to get done.

Elsewhere, Evotec AG announced plans to buy Renovis, Inc. in a $151.8 million deal.

Kellwood jumps on Sun offer

Shares of St. Louis-based Kellwood were up 35% in pre-market action just after the consumer apparel company announced that Sun Capital expressed interest in buying all of its shares at a 38.4% premium to the market price. By 10 a.m. ET, the stock was up 28.68%. The stock went on to gain $4.00, or 26.37%, to close at $19.17 (NYSE: KWD).

"The company's board of directors will carefully evaluate the Sun Capital proposal and other alternatives available to the company, taking into account the potential benefits that may be realized through the company's previously announced long-term strategic plan," said a statement released Wednesday morning.

"Kellwood is a troubled name," said one analyst on Wednesday morning. "That they were able to get an offer like this is truly exceptional and I think they'd be wise to jump on it. It may be the only chance they have to get out of their predicament."

The predicament came in the form of a $2.54-per-share net loss for the last quarter. Since then, Kellwood has been subjected to downgrades by Broadpoint Capital Inc. and First Albany.

On Tuesday, Broadpoint analyst Randall Scherago cut Kellwood's rating to neutral from buy. That move shoved shares of Kellwood down to their worst-ever levels when the stock lost $1.60 to end at $14.36.

"People have been jumping ship since before then," said one sellside trader on Wednesday. "They've seen the writing on the wall and they've been selling as quickly as they can. This may make a big difference though. If the stock does actually have value, some people may be buying in to get the bargain before the stock takes off again."

To make matters worse, Moody's Investors Service recently placed the company's debt under review.

Earlier this month, Kellwood announced plans to reduce its women's sportswear businesses to three divisions from seven - a move analysts have said will be a costly one.

Accredited cuts price on tender offer

Elsewhere, San Diego-based Accredited Home Lenders said it has reached an agreement with Lone Star Fund V to slash the asking price of its planned tender offer so the two can complete their troubled merger.

The two have now agreed to a stay in the lawsuit, and the suit will be dropped without prejudice once the tender offer is completed.

Accredited Home Lenders' stock climbed ahead of the opening bell by almost 18%. The news sent the stock up $1.78, or 18.2%, on the day to close at $11.56 (Nasdaq: LEND). After-hours, the stock dipped by a penny.

To settle the pending lawsuit between the two, the price for Accredited's stock was cut to $11.75 from $15.10 per share.

"I think there was no doubt that the price would have to come down," said a sellside trader asked Wednesday about the agreement. "The merger is a smart move for LEND, I don't think that's ever been in question. But Lone Star had no right to pull out of the agreement. I think that was the big problem, but now it seems things are straightened out and things will move forward."

"This new agreement fairly settles our dispute and will expedite the completion of the merger with Lone Star," said James Konrath, Accredited's chief executive officer, in a statement. "We will now turn to the business of rebuilding Accredited for a brighter future with Lone Star."

"The amended merger agreement eliminates most of the original merger agreement's conditions to closing the amended tender offer," said a statement released Wednesday by Accredited. "The primary remaining conditions to closing are the valid tender without withdrawal of more than 50% of Accredited's outstanding shares and the absence of any injunction or similar order preventing the closing."

Those conditions were a major bone of contention with Lone Star. The private equity firm had alleged in August that it had the right to terminate its merger agreement with Accredited because of the mortgage company's lackluster performance.

Lone Star agreed to drop price earlier

Earlier this month, Lone Star had agreed to drop its price to $8.50 from $15.10 per share to resolve the pending litigation.

That offer was shot down by Accredited and scoffed at as a diversionary tactic.

"We believe that this offer is nothing more than an attempt to divert attention from the inherent weakness in Lone Star's litigation position under the agreement," said a statement from Stark Investments, Accredited's majority shareholder, released earlier this month.

"Based on our review of the agreement, it is evident that Accredited endeavored to obtain, and did successfully negotiate, unambiguous terms preventing Lone Star from terminating the agreement based upon the changes in Accredited's operations or financial condition that have occurred since execution of the agreement."

Lone Star deposited $295 million in the Bank of New York Mellon to fund payment of the amended tender offer price for all of Accredited's stock.

Also, Lone Star agreed to provide $49 million in financing to Accredited, $34 million of which will be applied to extinguish outstanding debt from one of Accredited's creditors. The rest will be used for additional liquidity.

Evotec, Renovis to merge

In other merger news, Hamburg, Germany's Evotec said it will acquire San Francisco-based biopharmaceutical company Renovis in a $151.8 million transaction.

Under the terms of the merger, Renovis shareholders will receive American Depositary Shares equal to 1.0542 Evotec shares for every outstanding share of Renovis. Current Evotec shareholders would own about 68.8% of the combined company, and Renovis shareholders will hold about 31.2% of the combined company. The transaction implies a price of $4.75 per Renovis share.

By 11 a.m. ET, shares of Renovis were up 8.43%, or 28 cents. The stock closed the day up 20.48%, or 68 cents, at $4.00 (Nasdaq: RNVS).

"By combining Evotec's drug discovery and development know-how with Renovis's medicinal chemistry and target validation expertise, we expect to form a global biopharmaceutical company with world-class discovery capabilities, a strong pipeline in [central nervous system] disorders and several significant research partnerships with leading pharmaceutical companies such as Boehringer Ingelheim, Pzifer and Roche," said Jorn Aldag, Evotec's CEO, in a statement.

"The merger of the two companies represents an important opportunity for Renovis and its stockholders," said Corey Goodman, Renovis's chief, also in a statement.

Aurora Oil eyeing alternatives

Finally, Aurora Oil & Gas Corp. said Wednesday it is seeking "strategic alternatives," alternatives which may include a sale, merger or other business combination of the company.

In addition to a possible sale, Aurora also is exploring possible revisions to its strategic plan, asset divestitures, operating partnerships and identifying additional capital sources.

"With the recent announcement of our Woodford Shale acreage and our continuing activities in the Antrim Shale and New Albany Shale, it is obvious that the company has more opportunity available than can be developed with available capital," said Aurora CEO William Deneau in a statement.

"Our primary objective is enhancing shareholder value. The retention of Johnson Rice & Co. to assist our board is a positive step in that direction."

Deneau went on to say in the statement that there is no timeframe set in the review.

Shares of Aurora ended the day up 6 cents, or 4.03%, at $1.55 (Amex: AOG). The stock shot up after hours, gaining 16.13%, or 25 cents.

Traverse City, Mich.-based Aurora is an oil and natural gas exploration company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.