Folks I've spotted an opportunity at a blank check company that is too good to pass up. These blank check plays I think are becoming more the norm as LBO's have been so fierce and private equity on the march, this is a way to get involved in that kind of wealth creation as an investor. The Company is Endeavor. Endeavor Acquisition Corp. (AMEX: EDA - News): A "blank-check" company no more, last month, Endeavor agreed to purchase American Apparel Inc. for $244 million. Under the terms of the deal, EDA will pay American Apparel founder and CEO Dov Charney approximately 32.3 million shares of restricted stock, assume $100 million in debt, create a one-time merger bonus pool of $2.5 million, and reserve up to 2.7 million shares of additional common stock to be made available to American Apparel employees. Charney's stock will be locked up for at least three years, and he is expected to buy out an existing American Apparel investor for $60 million. He will also stay on with the company as CEO, and the deal is expected to close sometime this summer (and one would suspect that Endeavor will change its name at that time). On December 29th, SAC disclosed holdings of 1,751,550 shares of Endeavor, or an 8.7% stake. The firm's holdings include options for 200,000 shares, and it previously disclosed no holdings in Endeavor. SAC's filing lists December 19th as the triggering date for its filing, the day it surpassed the 5% ownership mark and the same day Endeavor announced the American Apparel acquisition. First off- love placing a bet with SAC! Secondly I am in retail and have a good respect for American Apparel- the quality of their product, the fact that most is made in the USA and the head of the company is a bit of a visionary and him staying on is a big plus. I believe you place a chip now and when the dust settles over the summer and the name of the company is changed to American Apparel we will be looking at a $20 stock- a double. I have tried these blank check plays twice before, the first time with JAMBA which didn't work out and the second time with NEXCEN which paid off nicely. Nexcen bought Athletes Foot with it's dough and then Bill Blass, nice pickups but honestly nothing like the potential of American Apparel. Jamba Juice, well they sell fattening juice & have huge stores that are mostly empty here in the city. I'm placing a BIG bet here on Endeavor.~ stoney
this story take awhile to develope there is no need to be in such hurry. ps. lesson learn from buying SIX at 8, should have get some more at 4, still holding.
Another one to check out is Marathon Acquisition Corp -- MAQ. They don't have a biz yet, but it is being run by the co-founder of Apollo. He also runs a mez-debt firm, so I'd expect any deal to have leverage in it when it is announced. I also looked at EDA and tried to get some shares after the deal was announced, but it went beyond my limit (and then some). Looks somewhat rich from a valuation standpoint (more than 3x sales on an EV/sales basis)...but the growers can trade at 4 or 5 easy. No growers trade at 1x sales. So... enjoy the EDA ride. Wish I was on board, but can't justify at these levels for myself...
Update* EDA did some financing. merican Apparel Announces $41 Million Debt Financing BusinessWire - January 23, 2007 6:00 AM ET Related Quotes Symbol Last Chg EDA Trade 10.90 +0.51 Real time quote. American Apparel Inc., a leading domestic vertically-integrated manufacturer and retailer of casual fashion basics announced today that it has completed a $41 million secured debt financing with a private investment firm. The proceeds of the financing will be used for working capital and will fund the company's expansion plans. A part of the proceeds will also go to repaying the company's current credit facility with C3 Capital Partners, LP. In conjunction with the financing, American Apparel has also negotiated a waiver agreement with its senior lender, U.S. Bank National Association, and an increase in the size of its senior credit facility from $57.5 million to $62.5 million. "As the first major investment of institutional capital into American Apparel, this financing represents an important validation of our vertically-integrated business model," said Dov Charney, CEO of American Apparel. "This transaction places the company on a firm financial footing and allows us to pursue our ambitious growth plans, as well as our proposed merger with Endeavor Acquisition Corp. The hard work and dedication of our employees, and the support of our customers, vendors, and creditors, have been critical during American Apparel's rapid growth." On December 19, 2006, American Apparel and Endeavor Acquisition Corp. (AMEX: EDA) announced the signing of a definitive merger agreement. The proposed merger is subject to, among other things, Endeavor receiving an opinion from an independent investment banking firm that the transaction is fair to Endeavor's shareholders from a financial perspective, Endeavor receiving shareholder approval of the transaction, customary closing conditions, including receipt of an acceptable 2006 audited financial statement, and various regulatory approvals. The transaction is expected to close sometime during the second half of 2007. About American Apparel American Apparel (www.americanapparel.net) is a vertically-integrated manufacturer and retailer of stylish, casual clothing for young metropolitan adults. Founded in 1997 by Dov Charney, American Apparel is the largest t-shirt manufacturer in the United States and operates the country's largest garment factory. All manufacturing is done at the company's facilities in Los Angeles, principally at its downtown Los Angeles factory and headquarters. The company employs more than 5,000 people and operates 145 retail locations in 11 countries. I bought more this morning! I am starting to warm to retail and my feeling is when these guys put out their first earnings report the metrics of the earnings power here is just not understood. This is a name I want to be in and I don't agree with MyDemaray's valuation points at all.
Just an added note. If this thing does take off. We might keep an eye on NEXC. A somewhat similar story.
Stoned have you seen any AA numbers/financial statements? I can't find anything on their web. What's so interesting about high-cost, nothing-special apparel company run by some.. controversial.. guy? Cohen bought under 9 and there's one analyst with target price $13: 08-Jan-07 Lazard Capital Initiated Buy $13 Why do you think this is $20 stock? BTW, if you like Cohen you can check TTWO - interesting company (game publisher - GTA is probably the most profitable franchise in industry), lot of shorts (41.80%) and terrible management. (SAC Capital disclosed a 5.5% stake in Take-Two Interactive (TTWO) on January 22, 2007)
Tank try the product! AA has great t-shirts and casual ware. They have a nice wholesale business as well. Think sexy Tank! One thing this company does really well is think out of the box. I love their new " virtual " store! The opening of clothing firm American Apparel's newest store marks a departure from its usual range of hip fashion products. Famed for the quality of the material it uses and its no-nonsense styling, the brand has made a surprise move away from the high street with its latest venture: a virtual outlet selling clothing to be worn by digital avatars in the massive online world of Second Life. "Selling our T-shirts in Second Life is not a profit-making venture. The prices of our garments in Second Life are merely a token sum," says Raz Schionning, the director of web services at American Apparel. "Our store in Second Life is an experiment in how we may establish relationships with our customers online. "I have few expectations about generating significant revenue - it's not the objective at this point. As with all the marketing we do, we're being innovative and keeping our ears to the ground. We want to see how people will respond to our presence in Second Life." It is no surprise that companies are becoming interested in marketing to Second Life's players. Figures obtained by American Apparel suggest that 80% of users were aged between 20 and 30, a very desirable demographic, and that they were evenly split by gender. "Given that users must have broadband internet access and reasonably powerful computers, we can infer that they are above average income earners and have attained above average education," says Schionning. "I would guess that we are looking at single people earning at least $45,000 (£24,400) a year and 60-70% holding a college degree." No doubt American apparel's virtual presence will translate to real-world sales, as players become more aware of the brand. Smart if you ask me! I think what's so impressive about AA numbers wise is the gross margins... American Apparel's sales for 2006 were an estimated $300m. His company's 80% gross margin, an indicator of its profitability, is well above the industry average of 60%. Its unbranded, brightly colored and moderately priced T-shirts, sweatshirts, underwear and jeans have become wildly popular among the young, well-travelled crowd that Mr Charney says represents the âworld-metropolitan cultureâ. Also If your like me Tank, you just hate seeing all these jobs go overseas.. From American Apparel's inception Mr Charney has put great emphasis on making his workers happy. Pay is performance-related, and amounts to $12 an hour on average, far above California's minimum wage of $6.75. American Apparel staff can buy subsidized health insurance for $8 a week. They are entitled to free English lessons, subsidized meals and free parking. Their workspace is properly lit and ventilated. When the company goes public employees will receive an average of 500 shares, expected to be worth about $4,500. Anti-sweatshop activists praise Mr Charney as a pioneer of the fair treatment of garment workers. The benefits he provides are expensive: subsidizing health insurance costs his firm $4m-5m a year; subsidizing meals costs another $500,000. Even so, Mr Charney says he has no plans to scale back these benefits. He considers his contented workers the reason for his success. Treating them well means they are less likely to leave, for one thing, which saves money. âAmerican Apparel is not an altruistic company,â says Mr Charney. âI believe in capitalism and self-interest. Self-interest can involve being generous with others.â Anti-globalisation activists like Mr Charney, too. Whereas Gap, another American fashion chain, outsources 83% of its production to factories in Asia, all of the 4,000 or so workers involved in American Apparel's manufacturing process work in the same factory in downtown Los Angeles. That's respect folks! But can it last? Having gone public, American Apparel plans to open another 650 shops across the world! This will not be possible without moving production to China, many predict. Retail analysts also doubt that American Apparel will be able to expand without resorting to outsourcing. Lets take a step back Tank and remember: The company is just three years old and already has 125 retail stores in the United States and around the world! Compare that to other retail ventures even the Gap when it started. This is organic growth is the best way. Now Charney claims to have stores, such as one in Manhattan's Soho, that produce $1,800 a square foot in sales, seven times the apparel industry average. He talks of building a $1 billion-a-year business in a few years, with 1,000 locations. He even wants to open stores in Hong Kong, exporting -- of all things -- American-made T-shirts to China. Tank I haven't been able to secondly confirm that soho store numbers-- but lets take it at face value (since I'm already neck deep into the stock) That's SEVEN TIMES the NORM! BUY.