R.G. Barry Opens Books to Hedge Fund Bidder

Investment firm Mill Road Capital Management LLC is expected to make a formal offer to acquire R.G. Barry Corp. by year-end in a deal that could value the company at up to $228 million, sources said. 

R.G. Barry said it has entered a non-disclosure and standstill agreement with the Connecticut-based investor, which made a $20-a-share offer to purchase the footwear company in September. As part of the agreement, R.G. Barry will open its books to Mill Road in exchange for the investor agreeing to a restriction on the acquisition of any more R.G. Barry shares.

Sources said that R.G. Barry shopped itself around for alternative buyers in recent months but was unable to secure an alternative bidder. If the due diligence process runs smoothly, sources said, the deal could close early next year.

In a filing with the Securities & Exchange Commission and a letter to R.G. Barry’s board of directors, Mill Road, which has been a longtime major shareholder, tipped its hat to the company’s management team, led by CEO Greg Tunney. But Mill Road said R.G. Barry’s plan to grow through acquisitions has been slow to deliver results to investors and that it would better realize its full potential as a private entity.

“Despite the company’s many strengths, we think that the public market will never accord a high valuation to R.G. Barry. It is a small company with limited opportunities to gain market share in a very low growth core market,” the filing said.

R.G. Barry noted that its board had not made any decision with respect to the Mill Road proposal.

The $20-a-share offer was at a 24 percent premium over the $16.17 average closing price of R.G. Barry stock for the last 30 days before the bid was made. The offer puts the deal at an estimated $228.4 million based on 11.4 million common shares outstanding.

The buyout bid marks the second time Mill Road has attempted to acquire the footwear firm in the past four years. R.G. Barry rebuffed a $77.8 million offer from Mill Road in 2009 following an unsolicited bid of between $7 and $7.75 a share. 

R.G. Barry is being advised by Peter J. Solomon Co. L.P. and Vorys, Sater, Seymour & Pease LLP.

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