Randa Accessories is sending another letter Monday morning to the Special Committee of Perry Ellis‘ board — it insists it can close on the deal and that the proxy filed last week by the company with the Securities and Exchange Commission contained some inaccuracies.
David Katz, chief marketing officer of Randa, said Sunday night in a telephone interview that Randa remains committed to purchasing the company.
Katz said his company all along never intended to engage a third party to share the equity risk, contrary to what was disclosed in the proxy statement. He said during the phone call that because of a bumped up deadline, it was the Special Committee that suggested an equity partner. “We were informed with 48 hours or less notice while we were still early in the process that ‘You don’t have your [financial commitments] so go in the direction of finding an equity partner,'” Katz said.
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As for why Perry Ellis and why now, Katz said Perry Ellis fits Randa’s strategic roadmap: adding to its core accessories business to keep doing what it does best; moving into adjacent classifications such as apparel, and balancing Randa’s business with a portfolio of company-owned brands that can grow direct-to-consumer and at brick-and-mortar stores.
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As for not moving sooner on an expression of interest in the company before Feldenkreis made his move, Katz said, “We didn’t see that the company was in play.” Feldenkreis’ offer — with financing already in place — gave him first-mover advantage, giving Randa what appears to be a scramble to catch up.
Executives at Randa believe that the Special Committee can allow Randa to speak with inbound licensors without violating the terms of the agreement inked with Perry Ellis founder George Feldenkreis. They said this was allowable to check on whether a Randa agreement is feasible, while the Feldenkreis agreement is still in place.
The letter to the committee also noted that the Feldenkreis transaction would result in a stand-alone post-closing company with a debt to EBITDA, or earnings before interest, taxes, depreciation and amortization, ratio of seven times, a much more leverage company than the proposed deal by Randa, which would have a debt to EBITDA ratio of just five times. In the phone call, Katz insisted that Randa’s deal would leave money available to invest in the business, as well as provide infrastructure upgrades.
As for the sole contingency regarding an outreach to inbound licensors and the possibility of some jumping ship if the accessories-heavy firm is ultimately successful in making the deal, Heath Golden, president of Randa Digital Labs, said, “The issue of licensors is not insurmountable.” He added, “We’re sure we can get it done.”
Although Randa doesn’t need Perry Ellis’ permission to approach its current licenses, Katz and Golden said an introduction from the steering committee would be important and it would position Randa as a legitimate force rather than “an outsider.”
Katz said that while Randa’s expertise is in accessories such as neckwear and small leather goods, it has branched out into other ancillary categories including caps and cold-weather products. In addition, it is seeking to transform its current business by not only getting into apparel, but also owning its own brands instead of strictly acting as a licensor for others. Katz pointed to PEI’s owned brands, which include Perry Ellis and Original Penguin, as well as its “growing retail presence,” as an attractive part of the business that Randa would seek to increase. “We see a lot of potential to grow that,” Katz said.
He pointed out that Hermès started as a saddlemaker and Ralph Lauren was only a neckwear manufacturer in the beginning, so there is precedent for expanding into apparel for other companies within the fashion industry.
If the special committee continues to not engage with Randa, Katz and Golden said they plan to continue to work on buying the company. “It is our intention to buy this company,” Katz said. “We believe it is in the best interest of the shareholders, employees, licensors, retailer and supply chain and we intend to continue to pursue it.”
Randa’s financial and legal advisers are Threadstone Partners and Willkie Farr & Gallagher.