Ex-Brooks Brothers Owners Sued for $100 Million by Investor
(Bloomberg) -- Brooks Brothers Group Inc.’s former owners were sued by a minority shareholder for allegedly putting their interests above those of other investors while pursuing a sale of the famous clothing company.
The shareholder, TAL Apparel Ltd., alleges that former chairman and chief executive officer Claudio Del Vecchio and his son Matteo refused to pursue certain bids for Brooks Brothers in 2019 because those deals would have forced them to pay TAL millions of dollars. TAL cited a “make whole” provision that would reimburse it if the clothing company’s value fell below that of their investment.
TAL, which filed the lawsuit on Monday in federal court in Manhattan, seeks at least $100 million in damages minus anything it recovers from the bankruptcy estate of the two-century-old company. Brooks Brothers filed for Chapter 11 protection from creditors last July, having been battered both by a declining demand for formal wear and a pandemic lockdown that forced retailers around the world to close stores. TAL made clothes for the company for almost two decades before investing $100 million in it five years ago after being approached by the Del Vecchios.
The 70-year-old Hong Kong-based garment manufacturer claims the Del Vecchios received “several attractive indications of interest” to buy the company that would have allowed Brooks Brothers to avoid bankruptcy but chose not to pursue those bids because they would have triggered the provision.
“The Del Vecchios then demanded that TAL take a ‘haircut’ on its ‘make whole rights’ before the Del Vecchios would pursue any sale” that would trigger the provision, the garment maker said in its suit. “TAL refused, the Del Vecchios threatened that instead of pursuing the bids on the table, they would ‘roll the dice’ and sell Brooks Brothers as part of bankruptcy proceedings in an unfounded effort to evade the make-whole provision.”
Paul J. Lockwood, a lawyer representing Claudio Del Vecchio, said the allegations in the complaint are false and he expects the court to dismiss the case.
Brooks Brothers agreed to be bought by Authentic Brands Group LLC and an entity Authentic owns with the mall landlord Simon Property Group Inc. for $325 million in August.
The case is Castle Apparel Ltd. and TAL Apparel Ltd. v. Claudio Del Vecchio, 21-cv-4406, U.S. District Court, Southern District of New York (Manhattan).
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