Kellwood accepts Sun Capital's takeover offer

NEW YORK (Reuters) - Kellwood Co KWD.N agreed on Monday to be acquired by Sun Capital Securities Group LLC, assuming the private equity firm's $21-per-share tender offer is successful and it ends up with a majority of the clothing company's shares upon the offer's closing.

The owner of the Phat Farm and Baby Phat brands said it is now recommending that shareholders tender their shares to Sun Capital's offer, worth $542.4 million, based on the number of outstanding shares as of November 3.

Kellwood shares rose 40 cents, or 2 percent, to $20.93 in morning trade on the New York Stock Exchange.

Sun Capital has previously said its offer valued Kellwood at $762 million, including assumed debt, and represents a 38 -percent premium to the company's closing price of $15.17 on September 18, the last trading day before Sun disclosed its takeover proposal.

Kellwood said the takeover is contingent on Sun owning a majority of Kellwood shares, including its existing 11.4 percent stake, once the offer expires at midnight Eastern Time on Tuesday.

If the tender offer is completed, shareholders who tendered their shares will be paid promptly, the company said, while shareholders that do not tender their shares will not get paid until the deal has been completed, which could take several months.

Upon completion of the offer, Sun Capital will assume control of the Kellwood board of directors.

Jason Bernzweig, vice president of Sun Capital, said the firm is prepared to commit "substantial resources beyond the purchase price to build Kellwood's business" and plans to "work closely with management and employees at Kellwood to strengthen the company and develop its branded portfolio."

Kellwood, whose other brands include Vince, Hollywould and Sag Harbor, had originally rejected a takeover offer from Sun Capital, leading Sun to take its bid directly to shareholders.

After at least one large shareholder expressed support for Sun's hostile bid, the St. Louis-based company removed barriers to the takeover, including a debt tender offer and a poison pill that prevented a single entity from owning more than 20 percent of outstanding shares.

At that time, the company said it gave the requisite approvals so that the tender offer could be consummated if a majority of the shares get tendered.

(Reporting by Martinne Geller; editing by John Wallace and Dave Zimmerman)