Dov Charney Mounts Effort to Wrest Back Control of American Apparel
Embattled former American Apparel CEO Dov Charney has no plans to walk away from the company he founded without a fight. Conversely, The New York Times informs us that Mr. Charney intends to wrest back control of American Apparel. Charney was fired from his position as American Apparel’s CEO least month, after the board grew tired of his long history of alleged misbehavior, including ongoing allegations of sexual harassment of former employees (learn more at the Inquisitr).
Since his firing, Mr. Charney has entered into a deal with a little known hedge fund named Standard General which could enable him to take back control of the company. According to the terms of the deal, Dov Charney increased his ownership stake in American Apparel to 43% of total shares after Standard General lent him the money to purchase those shares. The deal, however, is not without its conditions for Mr. Charney. The New York Times tells us that in exchange for lending Dov Charney the money to purchase close to majority ownership in American Apparel, Mr. Charney ceded virtually all decision making power to Standard General. That is, even if Dov Charney is reinstated as American Apparel’s CEO, he will not be able to make any decisions unless Standard General signs off on them.
The New York Times also tells us that when Mr. Charney was asked why he has essentially handed over his ownership of American Apparel, and he stated that, “I handed over my ownership control to Standard General so they could protect the company and all of its stakeholders, particularly the employees.” Mr. Charney was concerned that in his absence, the board might entertain ideas such as moving American Apparel’s production floor overseas. At present, Dov Charney’s 43 percent stake in American Apparel is not enough to allow him to take back control of the company, but The Chicago Tribune tells us that if he can succeed in gaining the support of just more than 7 percent of the voting shareholders, that will be enough to enable him to appoint a new board of handpicked successors who may re-appoint him as CEO.
While discussing the probability of Mr. Charney’s chances of success, The Chicago Tribune goes on to tell us that, according to David Rosewater, a partner for Schulte Roth & Zabel in New York who has worked on consent solicitations in the past, “His chances of succeeding look pretty good” and, “It is not a very high bar to get to a majority of the outstanding.”
Presuming that Dov Charney is able to reinstate himself as CEO of American Apparel, the drama could just be beginning for those who ousted him.