KarpReilly, HIG partner on $165m retail buyout

The two private equity firms have submitted a proposal to delist American fashion retailer Charlotte Russe, a year after KarpReilly failed to secure buyout negotiations for the company. The proposed deal represents up to a 38% premium over yesterday's closing share price.

KarpReilly Capital and HIG Capital have bid between $165 million and $175 million for Charlotte Russe, a US ladies clothing and accessories retailer with 487 outlets.

The US firms have offered  $9 and $9.50 per share in cash and equity for all of Charlotte Russe’s outstanding shares. This represents a 31 percent to 38 percent premium above yesterday’s closing share price of $6.89.

KarpReilly also disclosed that it has acquired nearly 1200 shares in Charlotte Russe, making it one of the company’s largest shareholders with a 5.4 percent stake.    

Allan Karp, a founding partner of KarpReilly originally acquired the 5.4 percent stake in 1996 and “played an important role in guiding Charlotte Russe from a small, regional retail chain into a large, national firm”, according to a letter which was included in the bid. Karp served on the board of directors between 1996 and 2007.

KarpReilly expressed its interest in acquiring of the company last year, but said  “the board declined to engage in a constructive dialogue with us”.

KarpReilly and HIG said in a letter they believed Charlotte Russe had been severely weakened by recent management changes and a 67 percent decline in share price since its 52-week high.

The firms have urged Charlotte Russe to take immediate action “to enhance value for its shareholder base” and hope to enter into a binding merger agreement once 21 days of due diligence have elapsed.

KarpReilly, a spin-out from Apax was established in 2007 by Karp and former head of Apax’s retail division, Chris Reilly.  

HIG manages more than $7.5 billion in capital. It was established in 1993 and targets mid-cap businesses.