A competing offer has come in for Destination XL Group Inc., the country’s largest men’s big and tall retailer — and the company is currently evaluating it.
On May 12, Zodiac Partners II, a West Palm Beach, Fla.-based acquisition entity of Camac Fund, made an all-cash tender offer to acquire all outstanding shares of DXL for 82 cents a share. The price represents an about 26 percent premium above the company’s closing share price of 65 cents a share on May 11 and values the deal at $46 million. The company’s stock was trading at 72 cents a share on Friday.
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The Zodiac offer comes as the Canton, Mass.-based DXL is finalizing a merger with FBB Holdings Inc., an inclusive-size retailer for men and women that operates under the FullBeauty and KingSize names. That deal was announced in December and under the terms of that agreement, FullBeauty will merge with a newly formed subsidiary of DXL, with DXL remaining the publicly traded entity under the ticker symbol DXLG.
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In addition, at closing, certain of FullBeauty’s equity and debt holders will complete a committed subscription of $92 million, through the sale of common stock in exchange for a combination of new equity and outstanding debt equitization, resulting in a term loan outstanding at closing of about $172 million, with a maturity of August 2029, the companies said. The combined business would have annual sales of about $1.2 billion.
However, Zodiac said it believes its proposal will allow shareholders “to realize immediate all-cash value, in contrast to the inherent uncertainty and risk associated with DXL’s proposed all-stock Full Beauty Brands merger. Full Beauty Brands is a formerly bankrupt company, and we believe this proposed merger with DXL would add harmful complexity, a new management team and a large debt burden in a very uncertain macro environment. Zodiac’s offer represents certainty of value and does not rely on future projections of synergy.”
DXL responded to the Zodiac offer on Friday, saying its board “is carefully evaluating” the “unsolicited tender offer with its independent financial and legal advisers,” and will “make a recommendation to shareholders in due course.” It advised shareholders not to take any action pending the board’s review, which is expected to be announced sometime next week.
Zodiac said that it had approached the DXL board privately with a “detailed take-private proposal,” but was “rebuffed,” and not provided with proprietary information on the company, and as a result, its current offer is based solely on publicly available information. Late Thursday, Zodiac said it had engaged in “positive dialogue with shareholders representing a meaningful amount of the shares outstanding” and would soon file an amendment to its tender offer.
Even so, Zodiac said it remains prepared to proceed with the offer and is willing to execute a definitive agreement within 45 days of being granted “appropriate access.”
It also said it has already lined up a conditional financing commitment from Eclipse Business Capital, which, when combined with Zodiac’s equity commitment, will be sufficient to pay 100 percent of the purchase price, as well as any required refinancing of DXL’s debt, and transaction fees and expenses.
“After surveying the landscape and speaking with other DXL stockholders, we’ve come to appreciate the fantastic work the DXL team has done to weather a difficult macro environment,” said Ziggy Gokea, managing member of Zodiac Partners. “We continue to be open to constructive engagement with everyone involved and believe that DXL is more resilient and better suited as a private stand-alone company. We believe our offer to be superior to the proposed transaction with FullBeauty Brands and are pleased to offer shareholders an all-cash alternative at a large premium to the share price.”
The Zodiac offer is scheduled to expire on June 19, unless extended.
Zodiac is not the first fund to make an offer for DXL. In December of 2024, Fund 1 Investments made a non-binding proposal to take the company private for $3 a share.
In reporting its fourth quarter earnings in March, DXL posted a net loss of of $29.6 million, or 54 cents a diluted share, up significantly from the $1.3 million loss in the fourth quarter of fiscal 2024. Sales were also down in the period ending Jan. 31, dropping 6 percent to $112.1 million from $119.2 million the prior year. Comparable-store sales fell 7.3 percent with brick-and-mortar sales down 8.6 percent and online volume down 4.3 percent. The company blamed the weather and a cautious consumer for the poor showing.