PacSun Rejects Adrenalina’s Offer

josh hunter

• October 21 2008
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Oct 21, 2008: For those readers who are just tuning into this story, here’s a quick recap of yesterday’s news and an update from today.

On October 20, Adrenalina, a Miami-based retailer with three locations in Florida sent an unsolicited cash-and-stock takeover offer to Pacific Sunwear Of California, Inc. (PSUN) for 293 million dollars, or $4.50 a share. Adrenalina is best known for its in-store FlowRider wave machines.

While PacSun’s stock was off nearly 80-percent from its 52 week high at the time of the offer, analysts quickly wrote the bid off as either a publicity stunt or an attempt by Adrenalina Chairman and CEO Ilia Lekach to boost his company’s stock price.

According to Motley Fool contributor Rich Duprey, Lekach has “a rich history of playing such games.”
Duprey says that when Lekach was CEO of Parlux Fragrances he was involved in “several similar dubious attempts to artificially boost the stock’s price, all of which ended in failure.”

“Parlux played the role of drama queen so often under Lekach that it could have been considered a diva,” writes Duprey. “In fact, two years in a row, former MarketWatch columnist Herb Greenberg bestowed the title of worst CEO of the year on Lekach.”

In this instance Lekach said he was publicly announcing the offer because PacSun CEO Sally Frame Kasaks has “repeatedly declined Adrenalina’s prior attempts to enter into discussions.”

Although Adrenalina had only 10.8 million dollars in assets and 329,000 dollars in cash on the books, lost 5.8 million dollars in 2007, and was down 7.8 million dollars over the past 12 months, Lekach said he was “highly confident [the deal] can be done.”

In comparison, PacSun, which operates more than 937 stores in 50 states and Puerto Rico, had sales of 580 million dollars in its fiscal first half and an operating loss of 8.3 million dollars. The LA Times story covering the offer was titled Minnow Nips At Whale.

That being said, it should be no surprise that PacSun wasted little time to reject the offer.

Here’s the release:

Pacific Sunwear of California Rejects Adrenalina’s Unsolicited Proposal

ANAHEIM, Calif., Oct 21, 2008 — Pacific Sunwear of California, Inc. (Nasdaq:PSUN), announced today that its board of directors has determined that the unsolicited proposal received from Adrenalina (OTCBB:AENA), a retail-entertainment company currently operating three stores in Florida, to purchase all of the issued and outstanding shares of common stock of Pacific Sunwear is not in the best interests of the Company’s shareholders.