Endeavor Closes American Apparel Deal

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The chief executive of Endeavor Acquisition, the special-purpose acquisition company that agreed to buy American Apparel earlier this year, no doubt breathed a sigh of relief Wednesday as the company closed on the deal just three days before its drop-dead date of Dec. 15, the New York Times reports.


Endeavor, led by Jonathan Ledecky, announced Wednesday that Endeavor shareholders had voted to seal the deal and that the company had taken on the American Apparel name.


The popularity of special-purpose acquisition companies, sometimes called blank-check companies, has exploded this year. But in the case of Endeavor, there had been concerns that its deal to buy American Apparel might not make it to the finish line in time.


An appeal of special-purpose acquisition funds, which raise money through an initial public offering for the sole purpose of deal hunting, is that they provide a relatively easy way to raise funds for an acquisition. This has led well-known dealmakers such as Thomas Hicks, the buyout veteran, Nelson Peltz, the activist investor, and Ronald O. Perelman, the billionaire financier, to join the fun.


But there’s a distinct downside as well, one that threatened to haunt Endeavor. Such special purpose companies operate under a tight deadline, usually 24 months or so, in which it must complete a deal or liquidate.


Endeavor spent considerable time pursuing other deals before setting its sights on American Apparel, a clothing maker known for its socially conscious approach and its sexually charged ads.


In early 2006, Endeavor considered buying a “branded restaurant chain with franchising opportunities” based in Los Angeles, according a previous proxy filing. Those talks ended when the chain accepted a cash bid from another investment firm. A few months later, Endeavor turned its attention to a “well-known national chain of weight-loss centers” based in California. Endeavor made a preliminary bid of $600 million to $650 million for the company, but it was foiled when another buyer struck a deal to buy the weight-loss chain for $600 million.


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