American Apparel founder Dov Charney has been defeated.
In the ousted CEO‘s final attempt to regain control of the peppy teen retailer he started in 1989, he came up with a $300m takeover plan to buy the struggling chain out of bankruptcy with private equity firms Hagan Capital Group and Silver Creek Capital Partners. Upon acceptance, he would have been reinstated as Chief Exec. But on Monday US bankruptcy Judge Brendan Shannon, who was more convinced by the company‘s debtors, rejected his bid.
“I confirm the debtors‘ plan,” Judge Shannon said, adding that “a swift decision” was necessary to allow the retailer to emerge from bankruptcy and begin its turnaround.
Shannon said he had no doubt that Charney had the best intentions for the company he ran for 25 years, but that his private equity-backed plan didn‘t “provide sufficient reason to reject the bid” and that the proceeding was “not about the circumstances of, or even correctness of, Mr. Charney‘s dismissal,”
Charney argued in court that American Apparel was stolen from him and he had been wrongfully terminated over unfair claims of sexual misconduct with staff, accusing the company of running a “grotesque” and “hateful” campaign against him.
Paula Schneider, who replaced Charney as CEO in January last year, said that Shannon‘s ruling was a “great accomplishment”.
“This is a new day for the company, and a positive outcome for our customers, vendors and employees,” she added.
“Dov‘s creativity, entrepreneurialism and dedication are the cornerstone of American Apparel,” said Chad Hagan, Managing Partner of Hagan Capital, the majority backer for Charney‘s bid. “Removing him from the company‘s board and leadership was a short sighted mistake, and we are seeing the results of this error unfold in the declining performance of the company today.”
“I am obviously disappointed,” said Charney in a statement, citing that he had always tried to “buck conventional wisdom” by trying to preserve American manufacturing jobs and keep apparel manufacturing in the United States.
“At every step along the way people challenged me and said I was crazy for trying,” he added. “For these endeavors I remain justifiably proud.”
