KarpReilly, HIG rejected by Charlotte Russe

The clothing retailer has rebuffed an unsolicited buyout offer worth between $165m and $175m as the company works to remedy its ailing operations.

The board of directors of US clothing and accessories retailer Charlotte Russe has unanimously rejected an unsolicited bid of between $165 million and $175 million from KarpReilly Capital and HIG Capital.

The board said in a letter to the private equity firms that the offer is “definitively not in the best interests of Charlotte Russe’s shareholders”.

The US firms offered between $9 and $9.50 per share in cash and equity for all of publicly listed Charlotte Russe’s outstanding shares on 12 November. The offer represented a 31 percent to 38 percent premium over the 11 November closing share price of $6.89.

Charlotte Russe has been addressing multiple operational, merchandising and inventory performance issues following a year-long strategic review, according to the company. The company put in place a new management team on the same date the proposal was received.

In their 12 November letter to Charlotte Russe, KarpReilly and HIG said 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 urged the company to take immediate action by entering into a merger agreement.

KarpReilly expressed its interest in acquiring the company last year, but said “the board declined to engage in a constructive dialogue with us”. The Apax spin-out owns nearly 1,200 shares of Charlotte Russe, making it one of the company’s largest shareholders with a 5.4 percent stake.

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