Destination XL Group’s board of directors has rejected the bid to take the company private that was submitted by Zodiac Partners II on May 12.
As reported, Zodiac, a West Palm Beach, Fla.-based acquisition entity of Camac Fund, made an all-cash tender offer to acquire all outstanding shares of DXL for 82 cents a share. The price represented about a 26 percent premium above the company’s closing share price of 65 cents a share on May 11 and values the deal at $46 million. The company’s stock closed at 73 cents on the Nasdaq exchange on Tuesday.
Last Friday, the DXL board agreed to evaluate the tender offer in partnership with its external legal and financial advisers but recommended unanimously on Tuesday that shareholders reject the offer.
“The DXL board of directors is committed to maximizing shareholder value and taking actions that are in the best interest of the company and its shareholders,” said Lionel Conacher, chairman of the board of DXL. “In that light, the board conducted a thorough review of Zodiac’s tender offer and determined that it does not reflect the company’s underlying value. The offer is also highly conditional and opportunistic, seemingly timed to deliberately exploit a period of market dislocation. We therefore recommend shareholders reject the offer and not tender their shares.”
In an SEC filing, DXL said Zodiac’s offer is “highly conditional and subject to significant execution risk. Most critically, the offer is subject to a financing condition, and offeror has not obtained committed financing sufficient to consummate the offer — offeror’s only fully committed equity is $10 million from its sponsor, Camac Fund, representing less than 25 percent of the approximately $46 million total consideration required.”
The Zodiac offer comes as the Canton, Mass.-based DXL is finalizing a merger with FBB Holdings Inc., an inclusive-size retailer for men and women that operates under the FullBeauty and KingSize names. That deal was revealed in December and under the terms of that agreement, FullBeauty will merge with a newly formed subsidiary of DXL, with DXL remaining the publicly traded entity under the ticker symbol DXLG.
At closing, certain of FullBeauty’s equity and debt holders will complete a committed subscription of $92 million through the sale of common stock in exchange for a combination of new equity and outstanding debt equitization, resulting in a term loan outstanding at closing of about $172 million, with a maturity of August 2029, the companies said. The combined business would have annual sales of about $1.2 billion.
The rejection of the Zodiac offer presumes that the FullBeauty merger will continue to move forward.
Zodiac did not immediately respond to the rejection but its offer is scheduled to expire on June 19.
As a result of the offer, DXL has rescheduled its earnings call for June 3 before the opening of the market, saying it needed more time to complete the results from its fiscal first quarter. At that time, president and chief executive officer Harvey Kanter and executive vice president, chief financial officer and treasurer Peter Stratton will host a conference call to discuss the results.
In reporting its fourth-quarter earnings in March, DXL posted a net loss of of $29.6 million, or 54 cents a diluted share, up significantly from the $1.3 million loss in the fourth quarter of fiscal 2024. Sales were also down in the period ending Jan. 31, dropping 6 percent to $112.1 million from $119.2 million the prior year. Comparable-store sales fell 7.3 percent with brick-and-mortar sales down 8.6 percent and online volume down 4.3 percent. The company blamed the weather and a cautious consumer for the poor showing.
