Published on July 22, 2014 | by LawNews
Prof. Ronald Colombo Comments in WSJ on Ousted American Apparel CEO Dov Charney’s Ploy to Save Job
Ousted American Apparel CEO Charney Boosts Stake to 43%
Move Raises Stakes in Battle for Control of Fashion Retailer
By Suzanne Kapner
The Wall Street Journal
April 22, 2014
Dov Charney, the fashion retailer’s ousted chief executive and founder, disclosed Tuesday that he has amassed a 43% stake in the company, putting him within striking distance of the majority needed to call a special meeting of stockholders and gain control of the board.
Mr. Charney is now trying to round up support from shareholders who could deliver the needed votes, according to a person familiar with his thinking. If he is able to call the meeting, Mr. Charney intends to expand the board to 15 and add friendly directors in an effort to keep his job.
American Apparel has adopted a poison pill to prevent Mr. Charney from increasing his holdings and moving to take control of the company. But it is unclear whether the purchase will trigger the pill, which would dilute Mr. Charney’s holdings, a person familiar with the situation said.
The issue comes down to timing, the person said. Mr. Charney is buying the stock from investment firm Standard General, which notified him it had acquired the stock on June 27. That is the same day that a committee of American Apparel’s board declared the pill. If the stock purchase came before the pill was in effect, it wouldn’t be triggered, the person said.
The uncertainty leaves the board to lobby shareholders not to support Mr. Charney.
“It’s a race,” said Ronald Colombo, who teaches securities law at Hofstra University. “It’s about how quickly each side can get their story out.”
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