Destination XL Group’s board of directors no longer believes its planned merger with FullBeauty Brands is in the best interests of DXL and its stockholders.
The company on Monday issued a preliminary proxy statement recommending that stockholders vote against an issuance proposal, which is needed to consummate the merger.
DXL cited “FullBeauty’s level of indebtedness, concerns regarding FullBeauty’s potential negative equity value, and the substantial economic dilution that DXL stockholders would experience” as reasoning behind its decision to advise against the merger.
A date for the special meeting — which will also include voting on a reverse stock split among other proposals — has not yet been determined.
Following a change in recommendation by the DXL board, FullBeauty Brands has the right to terminate the merger agreement. DXL could then be required to pay a termination fee of $2.5 million, as well as an out-of-pocket fees and expense reimbursement of up to $950,000, per an updated proxy statement from the company.
DXL in June announced it was reconsidering the merger, which had been agreed to in December. Under the deal’s terms, FullBeauty Brands would own 55% of the combined company while DXL shareholders would own 45%.
The formal push by the board to stop the merger comes after DXL in May rejected a go-private offer from Zodiac Partners worth about $46 million. Zodiac Partners submitted an updated proposal — increasing it slightly from 82 cents per share to 84 cents per share — and was again rejected by DXL’s board earlier this month.
