A proposal by Sports Club Co. Inc.'s four principal stockholders and their affiliates to take the Los Angeles-based chain private has been shelved.
Collapse of the proposed deal, which was first announced last February, was disclosed last week in a 10-K filing with the Securities and Exchange Commission and confirmed by company executives.
Under the proposal, shareholders would have received $2 for each share of common stock from a newly formed entity. That entity was to be owned by the principal stockholders, New York-based mixed-use property developer Millennium Partners, Sports Club Chief Executive Rex A. Licklider, company founder D. Michael Talla and Los Angeles-based Kayne Anderson Capital Advisors LP.
Sports Club was trading last week at about $1.40 a share.
The company will go ahead with plans to sell six of its nine fitness complexes to an affiliate of Millennium for $65 million. That portion of the deal is expected to be finalized this month.
After the sale, Sports Club will retain control of three Southern California clubs, while the Millennium affiliate will take over three facilities in New York and clubs in Boston, Washington D.C. and San Francisco.
"Basically, we just decided to do an asset sale, which is a single transaction with no other elements to it," said Licklider. "Once that is completed, we will have a ton of cash on the balance sheet. We will then, some time next year, decide what we will do with that cash. We may decide to go private, we may not."
Licklider added that, "if you don't have a clear cut picture about how you are going to grow a company to $1 billion in revenues, you probably shouldn't be a public company."
Sports Club will arrange for new financing secured by property in West Los Angeles. The financing, along with proceeds from the sales, will go toward retiring the company's outstanding $100 million of senior secured notes due in March 2006.
Meanwhile, the American Stock Exchange is still considering a de-listing because of the company's failure to file its financial reports in a timely manner. Last week, Sports Club filed two quarterly reports for this year and last year's annual report.
The growing appetite for fast-fashion stores, where merchandise is quickly restocked to keep on top of trends, gives local apparel manufacturers an edge against foreign competition, according to a report by global consulting firm Bain & Co.
The report stresses that the proximity by local suppliers to U.S. fast-fashion stores could trump higher production costs. It's a "business model that enables a retailer or wholesaler to provide the customer more of what they want, when they want it," the report says.
Fast-fashion retail only accounted for about 1 percent of the 2004 market share in the United States. That's compared with 18 percent in Spain and 12 percent of the market share in the United Kingdom.
Los Angeles-based Forever 21 Inc., one of the locally based practitioners of fast fashion, is illustrative of the rapid growth potential. The company projects revenues could reach $1 billion this year, up from $640 million last year.
The numbers reflect a long-term shift in the market toward fast-fashion outlets. Fast-fashion is "redefining the consumer definition of fashion" and "radically changing consumer shopping behavior," the report concludes.
Vintage rock T-shirt maker Trunk Ltd. is revving up with an agreement to design and distribute Harley-Davidson Inc. sportswear.
The Harley-Davidson line will include limited edition crew shirts and sweatshirts that retail from $75 to $160. The items will feature retro Harley-Davidson imagery. Trunk, a Culver City-based division of the CINQ Group, sells Alice Cooper, ACDC, David Bowie, Kiss, Rolling Stones and other music shirts to specialty retailers throughout the country.
M. Fredric & Co. Inc., the Agoura Hills-based boutique chain just opened a men's store on Ventura Boulevard in Studio City. The store is the second men's store for the chain and pushes the total number of M. Fredric stores to 21. M. Fredric plans to open its third men's store in Marina del Rey in November.
*Staff reporter Rachel Brown can be reached at (323) 549-5225, ext. 224, or by e-mail at firstname.lastname@example.org .
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