KEY POINTS:
New Zealand multimillionaire Eric Watson is leading a $551 million bid for international clothing firm American Apparel.
Watson is pursuing the clothing company through Endeavor Acquisition Corporation - the American Stock Exchange-listed acquisition company he founded with US entrepreneur Jon Ledecky last year.
Watson's company Cullen Investments said yesterday that Endeavor had signed a conditional deal to purchase American Apparel.
London-based Watson - whose fortune is said by the National Business Review's Rich List to be $350 million - chairs Endeavor and owns a 10 per cent stake in the company.
Watson said American Apparel had significant growth potential.
"Its brand-building efforts and 'made in downtown Los Angeles' operation have created significant brand awareness and a cult status worldwide," he said in a statement.
American Apparel was founded in 1997 and claims its seven-storey manufacturing plant near the centre of Los Angeles is the largest garment factory in the US.
It has more than 150 retail stores around the world.
Endeavor raised US$129.3 million ($185.2 million) with an initial public offering last December for the purpose of buying a major business.
Cullen Investments chief operating officer Liz Style said American Apparel was forecast to generate sales of about US$275 million and earnings before interest, tax and amortisation of about US$30 million for the year ending December 31.
Should the purchase - which is conditional on approval from Endeavor shareholders - succeed, Endeavor would change its name to American Apparel after the takeover.
"Endeavor issues shares to American Apparel, and will then change its name to American Apparel so the Endeavor entity effectively falls away. Endeavor itself does not continue so obviously will not make any further purchases," said Style.
Endeavor - which is Watson's first US start-up venture - was a publicly listed special-purpose acquisition company, in which experienced acquisition management teams raised funds to buy an existing business, she said.
Watson's interests in New Zealand include Pacific Retail Group and a 50 per cent stake of Hanover Group, a large privately owned financial services business.
Pacific Retail Group was taken over by Watson and delisted earlier this year and its only remaining New Zealand business is Bendon.
Style said special purpose acquisition companies were a feature of the US investment landscape and gave Wall St a chance to compete with private equity funds in the buy-out arena.
The Endeavor board includes Kerry Kennedy, daughter of Robert F. Kennedy and founder of the Robert Kennedy Memorial Centre for Human Rights, Carlyle Group managing director Edward Mathias and Richard Roberts, partner with US national law firm Thelan Reid.
The transaction is expected to be completed by the middle of next year.
