With CEO Out, Children's Place Hires Lehman Brothers

Children's Place PLCE (NASDAQ) made it official, they have hired Lehman Brothers to help explore strategic options to improve its operations. It remains possible the company may be put up for sale.

"The Board of Directors and management team are focused on strengthening the organization and positioning the Company to take advantage of long-term growth opportunities through its Children's Place and Disney Store brands," said chief executive Chuck Crovitz in a statement. "We believe it is in the best interest of the company, our shareholders, and employees to initiate a comprehensive review of strategic alternatives."

I bring this up because the latest announcement has a great deal to do with the previous resignation of the company's CEO. As discussed in my earlier blogs, Children's Place previous CEO, Ezra Dabah, the company's largest shareholder, has hinted he may be seeking ways to purchase the firm. Dabah had been forced to resign after a company probe found he had violated internal corporate policies for securities trades.

The company has been reeling lately and a purchase by Dabah would be a strange circumstance. Could he rest total control at a fire sale price? If so, how would this all be viewed? Who else at there might be interested in Children's Place?

Keep a close eye on this company, it could turn out to be story with innumerable angles.

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Former CEO Children's Place Has Finally Got the Attention of The Firm

Ezra Dabah the former CEO of troubled children's retailer, A Children's Place PLCE (NASDAQ), and its largest shareholder appears to have finally gotten the attention of the public company.  I have been following Dabah's attempts for some time in the blog.  After continuing efforts to get the company to consider Dabah as a possible acquirer of the firm after his initial ouster back in September 2007, the board has finally responded to his requests.  In an Associated Press story by Amanda Fehd in the Atlanta Journal Constitution Fehd wrote,

The board of Children's Place Retail Stores Inc. said Friday it has approved a request from its former chief executive Ezra Dabah to work on a proposal to acquire the company with a private equity firm.

Dabah had asked the board's permission to bypass shareholder acquisition laws that could otherwise preclude Golden Gate Private Equity Inc.'s participation in an offer.

Children's Place continues to struggle in the midst of a difficult retailer environment and a decline in the company's cache as a moderate priced but high styled children's clothing store. Keep a close eye on how this all plays out.

For more:

The Deal.com (May 22 update)

Children's Place CEO Forced Out

Children's Place Retail Stores PLCE (NASDAQ), the once high flying children's retail chain forced its CEO, Ezra Dabah to resign and named board member Chuck Crovitz as interim CEO. Dabah has served as the company Chairman of the Board since 1989 and Chief Executive Officer since 1991. In a press release the retailer said,

... an investigation found Dabah did not comply with its securities-trading policies. The internal probe also found irregularities in expense reimbursement practices by its chief creative officer. The company said none of the violations have a material affect on its operating results. The company went to say, "in light of Mr. Dabah's resignation and the change in executive roles, the company expects that additional time will be required before the company can complete its overdue Annual Report on Form 10-k for the fiscal year ended February 3, 2007, including its audited financial statements for such year, and its other overdue SEC periodic reports.

The company also announced it will soon engage a search firm to conduct a search for a permanent successor to Dabah. The initial market response to the announcement was very positive. The stock jumped after the announcement. The company still faces, however, a number of major hurdles particularly with regard to the management and approach of the firm. Children's Place has been steadily losing ground to competitors. Can new management make a difference or are the company's problems far more complicated than management alone?

For more:

NJ Record
CNN Money
Prime Newswire
Wall Street Journal (reg. req.)
MSN Money
BusinessWeek
RTT News

More Management Turmoil at Children's Place

The Children's Place PLCE (NASDAQ) continues to face management unease.  The company's CFO, Richard Paradise, who has been in his job for less than one year, announced he would be leaving August 1, to pursue another business opportunity.  He joined the company back in November 2007.  Paradise joined the firm soon after the company's former CEO and largest shareholder, Ezra Dabah, was pushed out of his job.  

Since the CEO change at the firm back in September 2007, the company has faced a number of  executive changes and growing financial pressures (see earlier blogs). Dabah, despite being out as CEO has taken steps to try and take over the firm.  According to Reuters,

Children's Place has been weighing a possible sale of the company under pressure from its largest shareholder, board member and former Chief Executive Ezra Dabah, who owns a 17 percent stake in the company.

After a difficult period following Dabah's resignation as CEO, the company has managed to stabilize.  Paradise's resignation announcement raises another potential red flag.  Susan Riley, the EVP for Finance and Administration would takeover Paradise's position and would continue to perform her other responsibilities.  

Keep a close eye on the company.

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Just-Style

MarketWatch

Children's Place ex-CEO Fights Back

Former Children's Place CEO, Ezra Dabah has come out fighting a few weeks after being forced to resign as CEO (see earlier blog). According to an article by Michael Barbaro in today's New York Times,

Mr. Dabah fired off a testy letter last night to the acting chairwoman of Children’s Place, charging that his resignation was “solely attributable to a power play by certain members of the board” and upbraiding the company for making remarks “that have disparaged my good name and reputation.”

The two-page letter, by turns angry and boastful, suggests that a nasty behind-the-scenes battle played out at the company over Mr. Dabah’s conduct, resulting in a split board vote on whether he should remain in the job.

As the stock has gone into a tailspin and rumors continue about a possible sale of the company, Dabah, who remains the largest shareholder, has succeeded in muddying the waters surrounding the firm even further. Dabah insists,

... he is innocent of any wrongdoing, that the board and he "mutually agreed" that he would resign and that his resignation "was without cause."

This story has legs and will continue for some time.

For more on the story see:

Bloomberg Update 3
Crains
Reuters
NY Times Dealbook

Scorned CEO Striking Back?

Ezra Dabah, the former CEO and still major shareholder of The Children's Place PLCE (NASDAQ) (approximately 17%), appears to be ready to make good on previous statements he planned to make a bid for the company. According to Crain's New York Business Dabah who was forced out as the company's CEO back in September 2007 (see earlier blog) recently sent a letter to the SEC,

revealing his intentions to offer, along with Golden Gate Private Equity Inc., $24 per share in cash for Children's Place.The letter seeks the board's permission to bypass certain Delaware shareholder acquisition laws that could otherwise preclude Golden Gate's participation in an offer.

The offer would be a 35% premium over Wednesday's closing price of $17.78. As of Dec. 13, Mr. Dabah owned about 5 million shares, or 17.2% of total shares outstanding. The total value of the potential offer is based on 24.1 million outstanding shares Mr. Dabah doesn't already own.

This is all happening at the same time that the company released a surprising same store sales report for January which saw a 6% increase over same month in 2007. The increase was especially surprising, considering the troubled retail market and the turmoil the company has been undergoing for the last number of months. To complicate matters, The Children's Place also recently received a Nasdaq delisting notice regarding its failure to hold its annual stockholder meeting by Feb. 3. The Company noted its request for an extension and noted the delay in filing their annual report as the reason for the delinquent meeting.

It's hard to sort through it all. Is the scorned CEO looking to get his revenge or is this just a smart move? Keep a close eye on the firm.

Children's Place is No Children's Fight

Ezra Dabah who was recently forced to resign as CEO of The Children's Place Retail Stores PLCE (NASDAQ) in a recent 13D filing has indicated he and other interested parties were considering making an offer to acquire the company. Dabah despite giving up his position as CEO remains the largest shareholder of the firm. Last week he began making attempts to clear his name (see earlier blogs). If Dabah can get a real private equity player to back him, he may get his chance to run the firm again and get his revenge.

Stay tuned.

For more see:

Investopedia
CNN Money
Streetinsider.com 13D tracker
Houston Chronicle
TheStreet.com
Reuters

Former Children's Place CEO Files Complaint

Ezra Dabah, the former CEO of troubled children's retailer (see earlier blog post) and the largest shareholder of The Children's Place PLCE (NASDAQ), continues to pressure the company. Dabah who was previously forced out as CEO has been seeking with the help of a private equity investor to buyout the firm. A Business Week story last Friday talked specifically about Dahah's latest move, the filing of a complaint with the SEC.

Dabah requested that the company hold its annual meeting within 45 days of his filing the complaint. The meeting is currently scheduled for June 27. The last meeting was held June 22, 2006. "There is no reason to delay the annual meeting for another four months," Dabah said in the filing with the Securities and Exchange Commission.

Stay tuned as the company's saga grows.

For more:

Dealscape 3/24
Reuters
Dealscape

Zale Jewelers Trys to Shine With New CEO

Zale Corporation ZLC (NYSE), the long troubled North American specialty jewelry retailer, announced the resignation of its current CEO, Betsy Burton along with the appointment of her replacement Neal Goldberg, who had previously served as President of the troubled children's retailer, The Children's Place Retail Stores. The management change comes in the wake of increased activist (hedge funds - Breeden Capital, Citadel LP, SAC all of whom made 13D filings) involvement in the company and a continuing decline in the company's performance despite a real change in corporate strategy.

Burton had only been CEO since February 2007 and served as acting CEO since February 2006. She has been on the company's board since 2003. Just as her replacement Neal Goldberg, Burton had an extensive retailing background. At the time she had been appointed as permanent CEO, Richard C. Marcus who was the Chairman of the Board said,

"Betsy has done a superb job running the Company since February. Under her leadership, we are moving forward with a customer-centric strategy that leverages our fundamental strengths to regain market share, improve profitability and create value for shareholders. Betsy is an experienced executive with an outstanding record of leadership and a deep knowledge of Zale. Along with the strong management team we have put in place in recent months, Zale now has the right leadership to realize our long-term growth potential."

Burton went on to shift the focus of the firm back to its more original retail strategy. According to the Dallas Morning News, Burton while interim CEO was quoted saying,

...the company believes the plan adopted by Leonard and former Zale CEO Mary Forte, who quit January 30, to market to higher-income customers and try to get product direct from foreign suppliers had not worked, and the company would go back to targeting average-income Americans.

Since Marcus's announcement on the appointment of Burton, a new Chairman, John B. Lowe Jr., has taken over and numerous management changes have occurred and yet, the company has continued to under-perform. In today's announcement, the new Chairman, John B. Lowe Jr., said Goldberg,

"has a unique combination of retail experience, leadership and team-building skills, and talent to move the company forward, building on the progress that has already been achieved."

Different Chairman same sentiments as when Burton was appointed. While Goldberg appears to have the right background and experience, he is coming from another retailer that recently has been under the gun (check the blog). The real question for me is what do the activist shareholders, who hold over 18% of the stock, plan to do? Zale has been floundering for a long time despite continuing efforts to turn itself around.

Stay tuned and make sure to watch both Goldberg and the outside activist investors (Breeden, Citadel and SAC).

For more see:

Reuters
Businessweek
Dallas Morning News
JCKonline.com
Diamond Intelligence Briefs
Houston Chronicle
Gerson Lehrman Group
Streetinsider.com 13D Tracker

Zale CEO Change - Update 1

Activist investor and former SEC Commissioner Richard Breeden has further increased his holdings of Zale stock. The additional increase in Breeden's holdings came after Neal Goldberg, the former president of children's retailer The Children's Place, was appointed CEO of Zale (see earlier blog post) on December 20th. CNN Money on January 2 reported,

Activist investor Breeden Capital Management LLC has increased its stake in Zale Corp. to 13.3 percent, according to a filing with the Securities and Exchange Commission Wednesday.

The Greenwich, Conn.-based investment fund reported owning 5.9 million shares, or a 13.3 percent stake in the jewelry store operator. In September, Breeden reported owning about 3.8 million Zale shares, or a 7.7 percent stake.

Speculation is running as to the reasons behind Breeden's increase in ownership. According to today's New York Post,

... (the increase) sparked speculation that Breeden is pushing Zale - the largest US jewelry chain by number of stores - to sell off assets and prepare itself for a sale to Signet Group. The British-based rival, which owns the Kay Jewelers and Jared chains, had pushed for merger talks with Zale in the spring of 2006, only to be rebuffed by Zale's board.

Stay tuned:

SeekingAlpha (Update 1/8/08)
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