Bauer Shareholders Reject Takeover

NEW YORK – Finally, a private-equity takeover deal that didn’t make it.

Shareholders of Eddie Bauer Holdings Inc. on Thursday fell short of the majority vote needed to approve Eddie Bauer’s acquisition by affiliates of Sun Capital Partners and Golden Gate Capital. Had it been approved, the acquisition would have taken the specialty store chain private for $9.25 a share, or about $277.7 million, plus the assumption of about $328 million in debt.

According to a filing by the company with the Securities and Exchange Commission, about 44% of the more than 30 million shares outstanding voted for the merger and 37% of the shares were voted against it.

A simple majority of outstanding shares was required for the acquisition to proceed.

The special shareholders meeting was originally scheduled for Jan. 25 but was delayed until Thursday after the company, in the course of preparing financial statements for 2006, found tax accounting errors pertaining to deferred tax assets and goodwill on its balance sheets.

Eddie Bauer said it would continue to operate as a standalone company. The firm operates 390 stores in the U.S. and Canada. Stores in other parts of the world are managed through franchising and licensing agreements. Eddie Bauer was part of Speigel Group prior to its former parent’s bankruptcy filing in March 2003.

Trading in Eddie Bauer’s shares on the Nasdaq exchange was halted just prior to the announcement of the non-approval vote. Shares ended the day down 39 cents, or 4.3%, at $8.79.