KarpReilly and H.I.G. Bid For Charlotte Russe

Charlotte Russe acknowledged the approximately $198.3 million offer, but chairman notes that the bid’s “fundamental premise was addressed.”

By AVRAM DAVIS

November 13, 2008

Private equity firms KarpReilly Capital Partners and H.I.G. Capital have launched a joint bid to acquire Charlotte Russe Holding, Inc. in an all-cash transaction.

The investment firms would pay $9.00 to $9.50 per Charlotte Russe share, or a premium of 31% to 38% above Wednesday’s closing price. At present, KarpReilly already owns 1,118,680 shares of Charlotte Russe giving the equity firm a 5.4% ownership stake.

In the beginning of 2007, KarpReilly attempted to acquire Charlotte Russe, but was unable to reach an agreement with the retail company.

On Wednesday, the young woman’s retail company announced the new hires of several executive positions which had been unfilled since July and August. The company’s newly hired chief executive officer, chief financial officer, and chief merchandizing officer, respectively, are John Goodman, Frederick Silny, and Emilia Fabricant.

Allan Karp, founder and partner at KarpReilly said, “We believe that investors have lost confidence in the current direction of Charlotte Russe. While we believe that this erosion can be reversed, we don’t believe it will be without fundamental change, which will be very difficult to implement in the context of being a public company. Given our deep experience in retailing, and with Charlotte Russe in particular, we believe that we and H.I.G. can offer Charlotte Russe stockholders superior value to what they can realistically expect to receive remaining as stockholders of the current public company.”

Formerly, Karp was a director of Charlotte Russe for eleven years. Together with Chris Reilly, he founded KarpReilly in 1993.

Charlotte Russe promptly responded to the offer, noting that the company would consider the offer, but offered appeared initially unimpressed with the offer. Jennifer Salopek, chairman of Charlotte Russe, said, “We would note that a fundamental premise of the KarpReilly proposal, i.e. that Charlotte Russe has no permanent management team, was addressed by this afternoon’s announcement of a new management team. The board has also been developing a new strategic plan to address current issues at the Company and is confident that the new management team would be well positioned to reinvigorate growth and profitability.”

In a Raymond James analyst report provided to MergersUnleashed by Thomson ONE Analytics, Samantha Panella argued that the San Diego, California-based retailer would likely reject the offer.

H.I.G. controls $7.5 billion of equity capital under management. The firm is based in Miami, and maintains additional offices in Atlanta, Boston, and San Francisco in the U.S., as well as affiliate offices in London, Hamburg and Paris.

KarpReilly controls $310 million in capital commitments.