Apex Global Brands, the American brand management and licensing organization previously called Cherokee Global Brands, which owns the Hi-Tec, Magnum and Tony Hawk brands, among others, confirmed that it has entered into a merger agreement with Galaxy Universal, a Colorado-based project management and investment firm.Galaxy is described as a sourcing and brand management company with wholesale activities that focuses on the athletic, outdoor and work categories.
If approved by shareholders, the closing of the acquisition is expected to occur in the second quarter of 2021. Under the terms of the agreement, which has been unanimously approved by the members of Apex’ board of directors, Galaxy is set to acquire all of the outstanding shares of Apex for US$2.00 per share in cash. However, Apex’ share price unexpectedly jumped to $2.62 after the announcement, suggesting that shareholders may want to jack up the purchase price. The company’s stockmarket quotation subsequently eased down to $2.41, compared with a 52-week record of $11.90, giving Apex a capitalization of just $1.37 million.
Most recently, lower licensee sales due to the pandemic and the non-renewal of certain Cherokee brand licensing deals have weighed on the revenues of Apex, forcing the company to repeadly ask its lenders for leniency as its operations failed to meet debt covenants. Its net debt amounted to more than $60 million as of Oct. 31.
“After conducting an extensive analysis of our strategic alternatives with our financial advisor, the board of directors concluded that our sale to Galaxy Universal LLC is the best path to deliver equity to our shareholders,” said Henry Stupp, CEO of Apex. “We believe that the sale process will be seamless for our licensees and that there will be no disruption to our operations.”
So far, company insiders owning about 30 percent of Apex’ shares have indicated support for Galaxy’s offer. A special meeting of Apex Global Brands stockholders will be held as soon as practicable following the filing of a definitive proxy statement with the U.S Securities and Exchange Commission (SEC) and a subsequent mailing to stockholders. The proposed transaction is subject to approval by Apex stockholders, along with the satisfaction of other customary closing conditions. Upon completion of the merger, Apex would become wholly owned by Galaxy.