EB Acquisition, Ltd. has responded to statements made by members of the Board of Directors of The Elder-Beerman Stores Corp. on June 26. Among other issues, these statements addressed the issues of break-up fees in the merger agreement and the process of qualifying bidders. The statements, made by Byron Bergren, chief executive officer, and Steve Mason, chairman of the Board of Directors, were subsequently published in a Dayton Daily News article on June 27.
Steve Mason disclosed that the merger agreement entered into on June 25 with Wright Holdings includes a $2 million “topping fee” and a $1 million fee for “documented expenses.” This totals $3 million in break-up fees. In previous letters to the Company’s Board of Directors, EB Acquisition urged the Board “not to enter into any transaction that includes a termination fee,” realizing that other parties have expressed interest in participating in the bidding process and that such a fee puts other bidders at a huge disadvantage at the expense of shareholders.
“In response to this recent disclosure, our company is forced to reconsider its interest in making an increased bid to buy the Company,” states Dan Summers, managing member of EB Acquisition. “Any increased bid made to buy the Company is automatically reduced by $3 million. Such fees included in this merger agreement only enrich management’s buyout and penalize the shareholders.”
Other statements made in the June 26 interview addressed the qualifications of EB Acquisition to contend in the buyout of the Company. Steve Mason addressed the situation and stated that the Board “never got financial information during the process” and thus deemed EB Acquisition, “unqualified.”
“In February of this year, our capital sources were verified to the satisfaction of RBC Capital Markets, the Company’s advisor, and our investment banking firm,” states Summers. “In April, after the verification of funds, Elder Beerman opened the data room to our due diligence team. On May 14, they abruptly closed it without reason or justification. To this day, EB Acquisition remains qualified.”
