(Filed Under Financial and General Interest News). Frederick’s of Hollywood Group Inc. has agreed to be taken private by a group of investors who already own most of its outstanding shares. The proposed move was first announced at the end of September. Thomas Lynch, the current CEO, has received a contract to remain with the company for three more years.

In all, the company had lost money in each of the past five years, with the accumulated loss totaling close to $100 million. According to the company, its current store count has dropped to 112.

Frederick’s said it “has entered into a definitive merger agreement that provides for the acquisition of the company by a group consisting of HGI Funding LLC, a wholly owned subsidiary of Harbinger Group Inc., and certain of the company’s other common and preferred shareholders (the “consortium”). The members of the consortium as a group beneficially own approximately 88.6% of the company’s common stock. The acquisition will be accomplished through FOHG Holdings, LLC (“Holdings”), an entity controlled by the consortium that was formed for the purpose of the transaction.”

“Under the merger agreement, the Company’s shareholders who are not members of the Consortium will receive $0.27 per share in cash upon completion of the transaction. The price represents a premium of 50% to the closing price of the company’s shares on September 27, 2013, the last trading day before the announcement by the consortium of its proposal, and a premium of 46% over the average closing price of the company’s common stock for the 45 trading days prior to that date.”

To evaluate the proposal to take the company private, the Frederick’s board “delegated to its lead independent, disinterested director the authority to review the initial transaction proposal from, and negotiate terms of the proposal with, the consortium, with the assistance of legal and financial advisors. The lead director completed a thorough review of the proposal, considered alternatives, negotiated improved terms of the consortium’s proposal and concluded that the transaction with the consortium was fair to and in the best interests of the company’s shareholders other than the members of the consortium. Based on the recommendation of the lead director, the merger agreement was also approved by the full board other than William Harley and Thomas Lynch, who recused themselves from the deliberations.”

Frederick’s noted that “Completion of the transaction is subject to certain customary conditions, including receipt of shareholder approval. The merger agreement must be approved by the affirmative vote of the holders of at least two-thirds of all outstanding shares of the company’s common stock. If completed, the transaction will result in the company becoming privately-held and its common stock will no longer be quoted on the OTCQB.

Further details concerning the merger agreement and related documents, including the employment agreement with Mr. Lynch, will be described in a Current Report on Form 8-K to be filed by the company with the Securities and Exchange Commission.”

“Cassel Salpeter & Co., LLC is acting as financial advisor to the lead director in connection with the transaction. Graubard Miller is acting as legal advisor to the Company. Milbank, Tweed, Hadley & McCloy LLP is acting as legal advisor to HGI Funding LLC.”

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Published 12-23-2013 by -