Dov Charney, the controversial founder of US fashion chain American Apparel, has managed to increase his stake in the company towards 50 per cent, according to regulatory filings in New York.
After the bell on Monday, it was revealed exactly how much common stock Standard General, a privately owned hedge fund, had acquired on Mr Charney’s behalf: 25m-30m shares – or a 17 per cent stake in the company.
Combined with Mr Charney’s existing 27 per cent stake, he now has control of 44 per cent of American Apparel shares, edging him closer to 50 per cent – the critical benchmark at which he can potentially push for his own reinstatement to the board.
A regulatory filing last Friday outlined a deal between the hedge fund and Mr Charney in which it will acquire more than 10 per cent of American Apparel stock, then lend money to the former chief executive to buy the shares back, which could bring him back into the boardroom if he can create a controlling bloc.
Mr Charney also has the support of investor Lion Capital, who demanded the repayment of a $10m loan from the board following the attempted termination of Mr Charney’s contract, people familiar with the situation said. That could trigger another default on a $30m loan with Capital One.
Those people also said Mr Charney had rallied support from a number of smaller ‘Mom-and-Pop’ sized shareholders, taking him to a position where he could call a special meeting to discuss the future of the company.
The move by Mr Charney, who was forced out as chief executive, comes 48 hours after the retail group unveiled a stockholder rights plan – or poison pill – adopted to prevent any kind of hostile takeover.
The ‘poison pill’ consisted of a one-year stockholder rights plan adopted by the company last week, which would be triggered if any shareholder who owned 15 per cent or more of its shares sought to increase their stake.
The retailer said the plan was “designed to limit the ability of any person or group, including Dov Charney, to seize control of the company without appropriately compensating all American Apparel stockholders”.
The Los Angeles-based chain, which has a network of stores across the US, Europe, and Asia, has been struggling with stagnant sales and $250m debt.
Last month, the retailer fired Mr Charney citing allegations of sexual harassment and financial mismanagement. Mr Charney accused the board of mounting a “hateful” campaign against him, and said he was prepared to take legal action to be reinstated.
Shares in American Apparel closed down almost 7 per cent in New York on Monday at 90 cents, having fallen 53 per cent in the past year.