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Slumping Aeropostale Fights Activist Investor Group

J.C. Penney isn’t the only retailer this year gripped in an internal power struggle with an activist investor. New York-based Aeropostale has been under intense pressure from investor Crescendo Partners to sell its recently limping business.

In November, Crescendo Partners dispatched a letter to Aeropostale’s board imploring it to immediately seek out buyers. Aeropostale is not acquiescing to Crescendo Partners’ demands without a fight. The retailer installed a poison pill, just as J.C. Penney did to thwart investor William Ackerman’s aggressive overtures, to insulate it from any attempts at hostile takeover.

Aeropostale also reached out to two separate private equity firms for the purposes of exploring the full range of strategic options available to it. Additionally, the retailer contacted more than one investment bank for counsel regarding how to fend off Crescendo Partners’ unwanted advances.

In response to the news that Aeropostale contacted private equity firms, the retailer’s stock rallied on January 15, jumping nearly 6 percent to $8.16. Crescendo Partners claims that, if managed properly, it should be worth between $14 and $16 per share. The trading boost is a rare bright spot during otherwise dark financial times for the teen-clothier. Aeropostale has reported steep losses for four straight quarters. It suffered a 15 percent dip in sales for the third quarter, losing $25.6 million. It plans to close forty underperforming stores this year.

Aeropostale CEO Tom Johnson has tried to turn the ailing retailer around by introducing new fashion lines and mercilessly cutting costs. The company discreetly shopped itself around to private equity firms in 2011 but, after it couldn’t find any interested buyers, refocused its energies on improving sales. Aeropostale’s shares plummeted 37 percent in the last twelve months and estimates its market value at approximately $607 million.

Crescendo Partners declined to specify the size of the stake it owns in Aeropostale but described itself as a “significant stockholder.”