Everlast investor believes Hidary offer possibly superior to Brands offer; asks board for more information

By Lisa Kerner

Charlotte, N.C, July 25 - Everlast Worldwide, Inc. investors led by Burlingame Equity Investors, LP said they believe the Hidary Group's $31.25-per-share offer for the company may still be superior to Brands Holdings Ltd.'s offer of $33.00 per share for Everlast.

Burlingame is Everlast's largest independent stockholder, collectively owning 14.3% of Everlast's common shares. The investor asked for more information about the board's negotiations with Hidary and Brands in a letter included in a schedule 13D filing with the Securities and Exchange Commission.

The Hidary Group offer includes an option for shareholders to roll over up to 50% of their interest into the surviving private entity. "We believe that the Hidary Group offer may still be superior. In our view, the roll over option gives stockholders the ability to participate in the future successes of Everlast, while also deferring taxes on up to half of their gains. The tax deferral alone probably makes the Hidary proposal superior to stockholders; let alone what value they could ultimately receive by rolling over up to half their interests into the surviving private company," Burlingame's letter stated.

Because the Hidary Group offer, like Brands' offer, allows stockholders to get all cash, Burlingame questioned how the board can deem the Brands deal superior. "Isn't it in fact more accurate to say that both offers provide the same 'certainty' to stockholders who want cash, while the Hidary Group offer provides greater flexibility to stockholders who wish to maintain some investment in the post-merger Everlast and/or to realize those tax benefits?" the investor said in the letter.

Burlingame said the company should provide all Everlast stockholders with "a complete, detailed, convincing explanation as to why the Brands Holdings offer was and is superior." Stockholders are also entitled to know why the board terminated discussions with the Hidary Group and how it maximized value for all stockholders, the filing stated.

As previously reported, another Everlast stockholder, Aquamarine Capital Management, accused the company's board of being "unusually quick" to sign merger agreements with break-up fees that make it more difficult and expensive for a potential higher bid to come through.

The investor encouraged the board "to slow down, step back, and go back to the negotiating table with Hidary Group to better understand the value of the roll-over structure to shareholders."

Everlast terminated its merger agreement with Hidary and paid a $3 million termination fee.

Brands Holdings is a private company incorporated in England and Wales and a subsidiary of Sports Direct International plc, a publicly traded company listed on the London Stock Exchange.

New York-based Everlast designs, manufactures and markets boxing and fitness-related sporting goods equipment.

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