American Apparel’s board has adopted a “poison pill” defense after ousted CEO Dov Charney signaled he has found a financial backer to enlarge his stake in the company.
The embattled clothing chain said Saturday that a special board committee adopted a one-year “stockholder rights plan” that will limit the ability of investors including Charney “to seize control of the company without appropriately compensating all American Apparel stockholders.”
The rights are “attached to all shares of common stock,” the company said. Each right will allow the holder to purchase one ten-thousandth of a share of preferred stock at an exercise price of $2.75.
In a Saturday statement, American Apparel said it has adopted the defense because Charney expressed an intent to acquire control or influence over the company.”
The retailer said it also adopted the poison pill “in response to reports of rapid accumulations of the company’s outstanding common stock.’
Legal experts said American Apparel’s move is the latest in a series that will likely land the retailer with Charney in Delaware Chancery Court, battling over the legality of each others’ power plays.
On Friday, Charney revealed in a securities filing that he has partnered with New York investment firm Standard General to increase his 27.2-percent stake in American Apparel. If Standard General is able to buy more than 10 percent of the company’s shares, it will effectively hand control of those shares to Charney under a complex loan agreement.
Sources told The Post Friday that Standard already appeared to have acquired more than 10 percent of American Apparel’s shares, and that through the new partnership Charney may be close to having majority control of the company’s equity.
Traders speculated that it was Standard General on Friday who had driven American Apparel’s shares up 29 percent on volume of 24.5 million — a daily turnover accounting for 14 percent of the company’s outstanding stock.
As first reported by The Post last week, Charney is angling to gather a controlling stake in American Apparel in order to retake the helm of the board, which ousted him in a surprise coup last week.
At a June 18 meeting, the board stripped Charney of his chairman title and suspended him as CEO. It cited an internal investigation that turned up allegations he allowed a blogger in 2011 to debunk a sex-harassment suit against Charney by posting naked pictures and flirty emails that the accuser had allegedly sent to Charney.
As Charney looks to regain control of the board, he may call for a special shareholder meeting to add enough directors to the board to give him a majority. Alternatively, Charney could demand a board shakeup, citing the written consent of his majority bloc, legal experts said.
Last week, five of American Apparel’s seven directors voted to suspend Charney as CEO and strip him of his chairman role.
Just minutes earlier, three of the five who voted against Charney had been re-elected to three-year terms at the company’s annual shareholder meeting.