Dov Charney selling out

He's the owner of L.A.-based American Apprel and always seems to be in the middle of controversy, mostly for the company's sexually-charged advertising (he has taken pictures of semi-naked models himself and was said to have conducted job interviews in his underwear). Anyway, the NYT and WSJ are reporting that Charney is selling his company to Endeavor Acquisition Corp., a small publicly traded investment group, for $382.5 million. Endeavor is a special-purpose acquisition company - sometimes called "blank-check" company - and its sole purpose is to find companies to buy. The announcement is scheduled for tomorrow. Charney, who only started the company three years ago, is expected to remain CEO. From the NYT:

At the heart of American Apparel are two threads: a high-minded business model that requires clothes to be made in the United States at double the minimum wage, and a retro-chic that glamorizes the T-shirt-and-jeans simplicity of the 1970s and ’80s. All of the clothing sold at the chain is manufactured at a factory in downtown Los Angeles, rather than in Asia, where the vast majority of its competitors’ goods are churned out. American Apparel provides its employees with subsidized health care and meals and with free English classes. The company’s progressive message has won over thousands of young urbanites — Charney refers to them as “Young Metropolitan Adults” — who flock to the chain for bright-colored T-shirts, leggings and underwear. American Apparel is expected to sell $275 million worth of them in 2006.

But as American Apparel has expanded, its founder, Charney, has been dogged by accusations of sexual harassment and a bizarre management style that could make it harder for him to operate within the traditional boundaries of a publicly traded company. Charney has gained a reputation as the Hugh Hefner of retailing, decorating his stores with covers of Penthouse magazine and acknowledging in interviews that he sleeps with employees. In lawsuits filed in 2005, several employees accused Charney of creating a work environment in which women did not feel safe.

Beyond all his nonsense, Charney had been a strong booster of the L.A. apparel business - and is one of its biggest players. Given that he'll remain CEO, it's a good bet that the operations will stay in Los Angeles.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
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