PacSun fires back at Adrenalina, says proposed merger not in shareholders' best interests

By Lisa Kerner

Charlotte, N.C., Feb. 17 - Pacific Sunwear of California, Inc.'s lead independent director Peter Starrett told would-be acquirer Adrenalina that PacSun is refocusing on its core concept and taking steps to revitalize its brand's merchandising and marketing programs.

While Adrenalina wants to enhance value for PacSun shareholders via a merger, Starrett said Adrenalina currently operates only three stores and has reported substantial operating losses.

Starrett, in a letter to Adrenalina chairman and chief executive officer Ilia Lekach, said Adrenalina's "own independent auditors have raised questions about its ability to continue as a 'going concern.'"

"While we can understand how you and other Adrenalina shareholders may benefit from a combination with PacSun, we do not believe that such a merger would in any way be in the best interests of PacSun's shareholders. Based on our regular dialogue with shareholders and vendors, we also strongly dispute your public contentions that your unspecified 'plan' has the support of either our largest shareholders or 'pillars' of the surf or skate apparel industry," according to Starrett's letter to Lekach, which was included in a PacSun news release.

PacSun's board rejected the Miami-based retailer's offers to buy the company for $5.00 per share and $4.50 per share.

Adrenalina has announced a slate of four director nominees for election to PacSun's board at the company's 2009 annual meeting of shareholders.

Adrenalina's director nominees are:

• Rob Gordon, senior vice president of marketing at Warner Bros. Records Inc.;

• Craig Lark, president, CEO and managing member of Hoven Sunglasses and Ammon Watches;

• Scott Oshry, partner in and founder of Zorbit Resources, a branding, design and manufacturing company for the beauty and cosmetic industry; and

• Vanessa Rousso, a professional poker player and game theory expert.

In addition to notifying PacSun of its intent to run a proxy contest, Adrenalina called for the immediate resignation of PacSun chairman and CEO Sally Frame Kasaks, it was previously reported.

The PacSun board supports Frame Kasaks' leadership, Starrett said.

Anaheim, Calif.-based PacSun is a specialty retailer of action-sport-inspired casual apparel, accessories and footwear for teens and young adults.

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