Ex-Lululemon CEO mulling a bid for apparel company?
Shares of Lululemon Athletica (LULU), the maker of trendy yoga apparel, shot up Monday after The Wall Street Journal reported that founder Dennis "Chip" Wilson has joined forces with bankers at Goldman Sachs (GS) to see if a private equity player might be interested in buying the company.
Wilson, who gave up the CEO job in 2005, stepped down as chairman last month after being forced to apologize for claiming that Lululemon's pants "don't work on some women's bodies." He owns a 27 percent interest in the Vancouver, British Columbia, company, which has a market capitalization of about $7.3 billion.
Some analysts are skeptical that the 59-year-old will be able to wrest control of Lululemon from the company's current management team.
"A deal involving Lululemon founder Chip Wilson is unlikely," said Cowen & Co. analyst Faye Landes in a client note cited by Bloomberg News. "We know and like him, but think that his recent track record of provocative remarks makes a deal that would involve raising billions of dollars unlikely."
According to the Journal, several banks had made overtures to Wilson and have tried to interest their clients in a Lululemon deal. So far, the talks haven't amounted to much.
Lululemon's stock price opened strong before gains faded later in the day, closing at $41.25, up 2.5 percent.
The last few months have not been easy for Lululemon, which has been hurt by other quality control problems separate from its shear pants. Earlier this year, the company became a punch line for late-night comedians after it was forced to recall millions of pairs of its signature black yoga pants after customers complained that they were too shear. Chief executive Christine Day subsequently resigned and was replaced by Laurent Potdevin.
Jennifer Black, an analyst with Jennifer Black & Associates, is a Lululemon fans and said in an interview she has worn the company's products "almost every day" for the past 10 years. Though the company's reputation has taken a hit, causing it to lose market share, many women still like its clothes.
"To me, there is a significant upside when you look out past the next couple of years," she said.
Wilson is the latest company founder to get pushed aside by new management team running the company. Last week, American Apparel fired CEO Dov Charney, who has been dogged for years by sexual harassment allegations. Charney, also the company's largest shareholder, is reportedly threatening to sue the American Apparel unless he gets his job back, according to the Los Angeles Times.
Earlier this year, Men's Warehouse (MW) cut ties with its founder and long-time television pitchman George Zimmer amid a dispute over corporate strategy. Zimmer had wanted the men's clothier to sell itself to a private equity player. Instead, Men's Warehouse agreed to buy rival Jos. A Bank (JOSB) for $1.8 billion.