Monday, November 24, 2008

Everbright signs final agreement to Gottschalks acquisition

Gottschalks Inc., the regional retail chain headquartered in California, on November 21 announced the sign of a definitive agreement for an investment in the amount of up to $30 mln made by the British Virgin Islands-registered corporation Everbright Development Overseas Ltd., providing financial and logistical services for manufacturers and merchants involved in trade between the United States and China.

The deal between the BVI company and Gottschalks, for which the letter of intent was signed in September, includes the transfer to Gottschalks of all of the issued and outstanding capital stock, trademarks, patents and licenses of Everbright Asia Limited, and provides that the Californian retail chain will set up a new wholesale business, from which it will get all profits.

The $30 mln investment by the BVI-registered Everbright is divided into a $15 mln acquisition of newly issued shares of Gottschalks common stock, and a capital call of up to $15 mln “in the form of a capital contribution or loan”, which Everbright may use to increase the retailer's credit facility, to purchase additional shares, and warrants for even more shares. According to the original letter of intent, Everbright had planned to buy $10 mln worth of the new stock, but in the final agreement this amount has been upped.

The additional business opportunities and enhancements under the terms of the definitive agreement will include direct sourcing program established by Gottschalks and Everbright, with a network of international manufacturers. Also, both companies will work together to establish consignment arrangements for specific merchandise categories to be sold in selected Gottschalks stores. Upon completion of the transaction with the BVI company, Gottschalks expects to test the consignment arrangement in select locations starting from the late spring 2009.