American Apparel, the clothing chain famous for its basic T-shirts and progressive manufacturing policies, has joined the long list of retailers bought by investment firms. On Dec. 19, Endeavor Acquisition Corp., a New York-based special purpose acquisition firm, agreed to buy the chain for $382.5 million, including $110 million in debt.
But unlike other recent buyouts, the transaction won't force American Apparel to go private. Instead, the firm will start trading on the American Stock Exchange or another national venue, with its new owners planning to expand its store fleet up to 800 locations worldwide from the 143 the retailer operates currently.
The transaction is scheduled to close in mid-2007, pending approval by an independent investment banking firm and Endeavor shareholders.
“American Apparel has a solid top-line strategy with good operating margins and significant expansion potential of its domestic and international store count,” said Jonathan Ledecky, president of Endeavor, in an official statement. But the timing of the buyout, considering Endeavor's plans for American Apparel, seems unusual. Since being founded in 1997, the retailer experienced a rapid rise, posting double-digit same store growth for most of the past decade. In 2006, however, American Apparel stores opened at least a year posted revenue growth of only seven percent, according to the New York Times.
American Apparel has been a hot-button company since coming on the scene. It famously boasts that none of its clothes are produced in sweatshops and insteads operates the largest garment factory in the U.S. It also runs racy advertisements featuring employees from its stores. And owner Dov Charney has been the subject of several sexual harassment lawsuits.