Cherokee Shares Surge as Board Mulls Potential Sale

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Cherokee Inc. shares surged on Monday after the Van Nuys-based brand marketing company said it has hired UBS Investment Bank to assist its board in “considering possible strategic alternatives.”


“Strategic alternatives” is a euphemism that is commonly used when a company is considering a possible sale. The press release, issued at midday, did not say whether Cherokee had received any offers from potential buyers.


The company said “no decision has been made” on whether it will go forward with any transaction, adding that “there can be no assurance that any transaction or transactions will occur or, if undertaken, the terms or timing thereof.”


The news was followed by a surge in Cherokee’s stock. As of mid-afternoon, Cherokee shares were up $2.05, or 6.1 percent, to $35.44. Cherokee shares have risen 75 percent in the past year, and returned nearly 92 percent if dividend payments are factored in.


Cherokee owns a handful of brand names that it licenses to retailers such as Target Corp. for apparel and other items. Target has the clothing designed and manufactured on its own, and pays Cherokee a fee for using its label.


Cherokee also represents other brand owners that are trying to strike similar licensing deals with large retailers. Last week, Cherokee said it signed a branding deal with the owner of Essence magazine for African American-themed health and beauty products.


Without any manufacturing overhead and just a handful of employees, Cherokee generated nearly $40 million in revenues during the past four quarters, producing strong cash flows.

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