Restoration Hardware amends merger agreement with private equity firm, offer price drops

By Lisa Kerner

Charlotte, N.C., Jan. 24 - Restoration Hardware, Inc. amended its previously announced merger agreement with certain affiliates of Catterton Partners.

The amendment calls for all of the outstanding shares of Restoration Hardware, other than those exchanged by certain stockholders participating with Catterton Partners in the transaction, to be acquired for a price per share equal to $4.50 in cash.

The $4.50-per-share offer price is a 68% premium to the closing price of the company's stock on Nov. 7, according to a company news release.

On Nov. 8, Restoration Hardware agreed to be acquired for $6.70 cash per share, a 150% premium to the stock's closing price on Nov. 7.

The amendment extends the outside termination date for the merger agreement to June 30 from April 30 and changes the definition of material adverse effect to increase the likelihood that the merger will close if Restoration Hardware "experiences weakness in its operating results."

For its part, Catterton Partners, through its affiliates, provided a $25 million subordinated loan to the company for working capital. The loan is not contingent on the closing of the acquisition, the release stated.

Restoration Hardware's committee of independent directors will solicit proposals from third parties through Feb. 28.

The transaction, subject to shareholder approval, is slated to close near the end of the first quarter of 2008.

It was previously reported that Restoration Hardware agreed to be acquired by an affiliate of Catterton Partners with participation by company chairman, president and chief executive officer Gary Friedman.

In addition, several institutional stockholders agreed to invest in the transaction or exchange some of their company shares for equity of the purchaser or its affiliate.

Restoration Hardware is a Corte Madera, Calif.-based specialty retailer of hardware, bath ware, furniture, lighting, textiles, accessories and related merchandise.

Catterton Partners is a private equity firm based in Greenwich, Conn.

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