USA: Sun Capital considering hostile bid for Kellwood

(Reuters) - Sun Capital Securities Group LLC said it would make a hostile bid for Kellwood Co (KWD.N), after its $544 million offer was rejected by the apparel maker known for its Baby Phat and Hollywould brands.

The private equity firm, which is the largest shareholder of Kellwood with a 9.9 percent stake, said it plans to make $21 a share offer directly to the company's shareholders.

The offer price represents a premium of about 27 percent to the stock's closing price of $16.51 Monday on the New York Stock Exchange.

"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," Sun Capital said in a letter to the company.

Sun Capital said it was concerned about Kellwood's fiscal 2008 outlook, which represented year-over-year growth in excess of 100 percent, as the company had a track record of performing below expectations.

In response to the letter, Kellwood said Sun's latest proposal significantly undervalued the strength of its brands and the opportunities for sales and earnings growth. Kellwood, which swung to a net loss in its second quarter, had projected earnings of $1.50 a share for fiscal 2008, significantly above analysts' view of $1.02 a share.

The company's revenue forecast of $1.55 billion, however, fell short of analysts' view of $1.71 billion.

Shares of the company were trading up about 9 percent to $17.94 in afternoon trade on the New York Stock Exchange. Before Tuesday's gain, the stock was down more than 49 percent so far this year.