R.G. Barry Corp., best known for the Dearfoams slipper brand, has agreed to be acquired for an estimated $215 million by Mill Road Capital, the Greenwich, CN.-based private equity firm that proposed buying it in September.
The merger will result in R.G. Barry becoming a wholly-owned subsidiary of a newly-formed corporation controlled by Mill Road. Besides the Dearfoam's slipper brand, the company owns Baggallini handbags, totes and travel accessories, and Foot Petals premium insoles and comfort products.
Mill Road, already an 9.8 percent shareholder, will acquire all outstanding shares for $19, an 18 percent premium over the 30-day average stock price prior to the firm’s initial proposal in September. It also is 67 percent higher than the company’s 52-week low prior to the proposal and 6 percent higher than the 52-week high for that period.
“Mill Road has a clear understanding of our vision for the business,” said R.G. Barry’s CEO Greg Tunney in a press release. “As a privately-held company, we expect to continue to invest in the long-term growth and acquisition strategies that we believe will propel R.G. Barry brands into a true leader in the accessories marketplace. We look forward to this partnership.”
Mill Road Managing Director Scott Scharfman said, “We have great confidence in the outstanding senior management team led by Greg Tunney and believe in their ability to successfully implement the long-term strategic plan,”
The merger agreement was unanimously approved by R.G. Barry’s board of directors. It’s expected to close in the third quarter.
The merger agreement permits R.G. Barry to solicit alternative acquisition proposals from third parties through May 31, and R.G. Barry intends to do so under the direction of the Board and with the assistance of its financial advisor, Peter J. Solomon Co.
R.G. Barry also released its third-quarter results, which included a 1.3 percent increase in net sales to $26.1 million. Net earnings grew 66.1 percent to $2.6 million, or 22 cents a share, although the latest period included a $2.4 million non-taxable gain related to the death benefit of insurance policies on the life of former Chairman, Gordon Zacks, who died Feb. 1.
Gross margins eroded to 44.1 percent compared to 45.9 percent one year ago. SG&A expenses of $11.4 million were up nearly 19 percent, primarily as a result of the company's continuing investment in long-term growth initiatives and costs related to the merger transaction.
In the Footwear segment, quarterly sales were $16.6 million compared with $16.4 million one year ago. Footwear gross margins decreased by 60 basis points to 39.4 percent; and gross profit remained relatively flat on a year-over-year dollar basis at $6.5 million. Third quarter operating profit decreased $0.3 million, reflecting fluctuations in a broad range of expenses.
In the Accessories segment, sales rose 1.2 percent to $9.5 million. Quarterly operating profit decreased by $1.6 million versus last year to $0.2 million, reflecting a 390 basis point drop in gross margin.
Tunney concluded, “The greatest test our business faces continues to be identifying and retaining profitable top-line growth in existing segments while adding new, category-appropriate drivers in other parts of the accessories universe. We remain committed to investing for the long-term in the people, platforms and strategies that will make that growth possible at a faster and more sustainable rate than we currently are achieving.”
