An investment firm with a 2.3 percent stake in Everlast Worldwide Inc. said Monday it will vote against last week's $146 million buyout offer for the boxing equipment maker because it believes the price is too low.

Aquamarine Capital Management LLC said Friday's $26.50 per share takeover bid by The Hidary Group represents a 'modest' premium of 14 percent over the previous day's closing price, and less that 12 times its fiscal 2007 outlook for earnings before interest, taxes, depreciation and amortization.
Aquamarine Capital Believes Buyout of Everlast at $26.50 is under-Priced – Fair Value in Excess of $50 Per Share

Aquamarine Capital's full statement follows:

While we commend management (in particular Seth Horowitz, CEO) for an exceptional job of resurrecting Everlast over the past several years, we believe this offer significantly undervalues both the brand and the company. As current shareholders who have so far accumulated 2.3% of the company, we intend to vote against the takeover proposal.

The Everlast brand is over 90-years old and is by far the dominant global brand in the sport of boxing. It has been worn by famous boxing personalities such as Muhammad Ali (Cassius Clay), Mike Tyson and Jack Dempsey. The brand has been worn in blockbuster films by famous award winning actors such as Sylvester Stallone in “Rocky” (1976), Russell Crowe in “Cinderella Man” (2005) and Hillary Swank in “Million Dollar Baby” (2004) as well as having been featured in the HBO television series “the Contender”.

With such a remarkable heritage and extensive media exposure, Everlast is perhaps the only company we know of that can successfully compete with global juggernauts such as Nike (NYSE, NKE), Adidas (Deutsche Boerse, ADI,) and Puma (Deutsche Boerse, PUM.)

The $26.50 takeover price equates to less than 12x FY 2007 EBITDA guidance. Given management’s recent history of conservative guidance, coupled with the buyer being closely associated with a current Everlast licensee, we believe that recent guidance will likely prove conservative, bringing the multiple closer to 10x if not lower.

Other fast-growing athletic and performance oriented consumer brands with lesser brand recognition, are valued at multiples which are 2x-3x greater. Assuming $15mm in EBITDA generation by 2008 (an arguably conservative estimate), a $50 share price for Everlast would equate to 18x EBITDA. Furthermore, $50/share represents a 30%-40% discount to the current value of comparables companies like Under Armor (UA, NYSE, $47.68, 31x EV/EBIDA), and would come much closer to representing fair value for current shareholders, in our view.

At this morning’s annual meeting, Everlast disclosed a 30-day “go shop” period in which the board will evaluate competing bids for the company. We mention this because this information was not included in this morning’s press release, which could lead current investors to conclude that the $26.50 offer is final. Given the disparity between the offer price and our view of fair value for this company, we would be surprised if superior bids do not arise.