Sycamore, Crescendo-backed Aeropostale adopts poison pill

The move comes a week after Crescendo urged Aeropostale to sell itself, joining a list of investors expressing frustration about the fading fortunes of the retailer that has lost money for three straight quarters.

Aeropostale, which has warned of another quarterly loss when it reports next week, has been hit along with rivals by heavy discounting going into the holiday shopping season.

The retailer has been trying to reposition itself as a lifestyle brand and offer more fashionable products, in addition to hoodies, jeans and t-shirts, that will allow it to charge more for its clothing.

The retailer said its poison pill would see a large number of new shares issued to other shareholders if one investor bought more than 10 percent of the company. For a passive investor, the threshold is 15 percent. 

Aeropostale has come under scrutiny from private equity funds that are attracted to it because of its brand.

It was in the best interests of Aeropostale to be taken private as it faced a long restructuring, Morningstar Inc analyst Bridget Weishaar said.

“It is often best to do (restructuring) in the private setting, where they don’t have the constant short-term vision of shareholders,” she said.

Aeropostale said it was not adopting the plan in response to any takeover proposal.

The plan, effective Nov. 26, aims to provide stockholders with adequate time to fully assess any takeover bid and was not intended to prevent an acquisition, the retailer said.

Aeropostale said it would put the plan to a stockholder vote at its 2014 annual meeting. The plan will expire on that day if it is not approved.

Weishaar said it was hard to say who would bid for Aeropostale, but added that Sycamore Partners Management could be a player, given its stake in the company and its history of taking troubled retailers private.

Hummingbird LLC, an affiliate of Sycamore, disclosed an 8 percent stake in Aeropostale in September.

Sycamore, which has more than $1 billion under management, took Hot Topic Inc private this year and bought Talbots Inc last year. 

Private equity firm Hirzel Capital Management LLC said last week it wanted to open discussions with the board that could lead to “an extraordinary corporate transaction.”

The Dallas-based firm holds about 6 percent of Aeropostale.

Crescendo, which described itself as a “substantial shareholder” in the retailer, did not disclose the number of shares held by it and its affiliates.

Aeropostale’s shares were little changed at $10.24 on the New York Stock Exchange on Nov. 26. The stock has dropped about 40 percent in the past six months.

 Sagarika Jaisinghani is a reporter for Reuters News in Bangalore

This story was edited and updated by Buyouts Magazine