Sun Capital bid for Kellwood may become hostile: report

A model displays a creation from the Baby Phat 2007 Fall collection during New York Fashion Week February 2, 2007. Investment firm Sun Capital Partners Inc is threatening to take its $544 million buyout offer for Kellwood Co, owner of the Baby Phat brand, to the company's shareholders unless the apparel maker's board reconsiders its rejection of the bid, the Wall Street Journal reported Tuesday in its online edition.

NEW YORK (Reuters) - Investment firm Sun Capital Partners Inc is threatening to take its $544 million buyout offer for Kellwood Co KWD.N to the company's shareholders unless the apparel maker's board reconsiders its rejection of the bid, the Wall Street Journal reported Tuesday in its online edition.

Last month Kellwood, the owner of clothing brands Baby Phat and Hollywould, rejected Sun Capital's unsolicited offer, saying the deal failed to fully value the company's expanded brand portfolio and opportunities for sales and earnings growth.

"Our strong preference is to acquire Kellwood in a friendly negotiated transaction, but we are prepared to take all necessary steps to protect the value of our existing 9.9 percent ownership position in Kellwood, including making a $21-per-share offer directly to Kellwood's shareholders," Sun Capital said in a letter sent to Kellwood's board yesterday, the Journal reported.

According to the Journal, Kellwood's board has implemented a number of rules that could complicate matters if Sun Capital decides to pursue a hostile tender or proxy contest.

These measures include a "poison pill" that could be deployed to block a tender, the newspaper said.

In addition, 75 percent of the shareholder vote is required for approval of a takeover instead of the usual simple majority, the Journal reported.

Representatives from Kellwood could not immediately be reached for comment.

(Reporting by Justin Grant; Editing by David Cowell)