Naked’s CEO Again Mentioned Possible Deal

Naked Brand Group, which produces intimates under the licensed Frederick’s of Hollywood label, announced it was somewhat closer to a long anticipated partnership with another firm.

CEO and chairman Justin Davis-Rice stated in a note to shareholders on September 24: “after extensive searching and due diligence, we believe we have found a disruptive opportunity in the clean technology sector,” but cautioned “there can be no assurance that we will sign a definitive agreement, or if we do sign an agreement, that we will be able to close the business combination.”

The company’s stock, which had closed on September 23rd at $0.59, closed at $0.69 on September 24.

This is the second time in recent weeks that Davis-Rice has addressed shareholders about a possible acquisition or merger, while providing very few details. On August 20 he told shareholders Naked had reached a tentative agreement to partner with another “substantial” firm and was in the process of due diligence. NAKD stock closed at $0.50 on August 19, the day before the announcement, and rose to close at $0.75 on August 26. Then it drifted downward, as time passed with no further announcements.

For several months prior, Naked had discussed expanding through a merger or acquisition, but instead one of its most significant moves was the divestiture of its 60 brick and mortar stores in Australia and New Zealand earlier this year.

In the message to shareholders on August 20, Naked chairman Justin Davis-Rice declared, “We have a strong balance sheet, no debt and an asset-light operating model and we see a very favorable M&A environment around the globe,” adding “I know many of you are eager for an update on the status of our plans to find a merger or acquisition partner. As we have said previously, we believe our strong cash position and tremendous shareholder base are assets that make Naked a highly attractive partner. Whilst many smaller opportunities exist and would seem easier to execute quickly, we have always believed and still strongly believe our attributes afford us the right to be selective seeking to partner with a substantial company, one that is an industry leader, with compelling growth prospects and disruptive technology. Over the past several months, our management has traveled extensively, meeting with companies that potentially meet those criteria. I am delighted to confirm we believe we have found such a company. We have recently reached preliminary agreement on non-binding terms and are now conducting due diligence. The company is in a sector which has been forecast to have strong growth for many decades to come. There is, of course, no guarantee that we will complete the deal, on the preliminary terms we have negotiated, or at all.”

Davis-Rice also pointed out that “the divestiture of the bricks-and-mortar operations of Bendon we have solidified our balance sheet following the completion of multiple strategic capital financings resulting in a net cash position of $270 million after repayment of all previous bank debt.” ­­—NM