Destination XL advises stockholders to vote against merger
Destination XL Group Inc. has changed course about the company’s merger with FullBeauty Brands
The parent company of DXL Big + Tall stores and Casual Male XL said it has filed a preliminary proxy statement with the U.S. Securities and Exchange Commission recommending that stockholders vote against an issuance proposal, which is needed to complete the merger. In December, Destination XL and FullBeauty, an inclusive-size online retailer for men and women, said they would combine forces in a “merger of equals.”
Under the terms of the deal, a newly formed subsidiary of DXL would have been created, with DXL remaining the publicly traded entity. In June, however, Destination XL said its board was reconsidering the merger and that the existing terms of the agreement are not “in the best interests of DXL stockholders.” But the company also said its board continued to believe in the “industrial logic” of the combination.
In explaining its decision to advise against the merger, the DXL board cited the increasingly challenging consumer environment since the execution of the merger agreement in December and FullBeauty’s "level of indebtedness."
It also cited concerns regarding FullBeauty’s potential negative equity value, and the "substantial economic dilution" that DXL stockholders would experience if the merger was completed on its current terms.
"Based on this evaluation, including these considerations, the DXL Board has determined that the merger and the transactions contemplated by the merger agreement, including the issuance proposal, are no longer advisable and are not in the best interests of DXL and its stockholders," DXL said.
The decision to advise against the merger comes after the retailer rejected an updated buyout offer of $0.84 per share from Zodiac Partners.
[READ MORE: Menswear retailer Destination XL rejects buyout offer — for a second time]
As of May 2, the company operated 293 stores, with the majority under the DXL banner.
