Contact:
Frederick’s: Movie Star: Sard
Verbinnen & Co:
Jennifer Lowitz Thomas
Rende Kim
Levy/Lesley Bogdanow
323-957-5809 212-798-4740 212-687-8080
jlowitz@fredericks.com tomr@moviestarinc.com lbogdanow@sardverb.com
FREDERICK’S OF HOLLYWOOD AND MOVIE STAR, INC.
TO MERGE IN STOCK TRANSACTION
Combined Company to Capitalize on Significant
Growth Opportunities
in the Intimate Apparel Market
__________________________________________
LOS ANGELES, CA and
NEW YORK, NY – December 19, 2006
– FOH Holdings, Inc., the parent company of Frederick’s of Hollywood, Inc.
(“Frederick’s”), and Movie Star, Inc. (AMEX: MSI) (“Movie Star”) today
announced that they have entered into a merger agreement. Under the terms of the definitive merger
agreement, which has been unanimously approved by each company’s board of
directors following the recommendations of special committees of each company,
Frederick’s shareholders will receive approximately 23.7 million shares of
newly issued Movie Star common stock.
The combined company will be called “Frederick’s of Hollywood Group
Inc.”
In connection with the merger transaction,
Movie Star has agreed to issue to its shareholders non-transferable rights to
purchase an aggregate of $20 million of new shares of Movie Star common
stock. The closing of the merger
agreement is conditioned upon a successful closing of the rights offering. To the extent that Movie Star’s shareholders
do not purchase their pro rata percentage of Movie Star common stock in the
rights offering, TTG Apparel, LLC and its affiliates, including Tokarz
Investments, LLC, and funds affiliated with Fursa Alternative Strategies LLC
(formerly known as Mellon HBV Alternative Strategies LLC) have agreed to
purchase, on an equal basis, any such shortfall. TTG Apparel, LLC currently owns 22.4% of
Movie Star’s outstanding common stock and is Movie Star’s largest
shareholder. Tokarz Investments, LLC
(whose sole owner is Michael Tokarz, also the sole owner of TTG Apparel, LLC)
and the funds affiliated with Fursa Alternative Strategies LLC together own all
of Frederick’s outstanding common stock.
Without giving effect to the rights offering,
Frederick’s shareholders will be issued 60% of the shares of the combined
company in exchange for their shares of Frederick’s. The combined company will also seek to
refinance both companies’ existing bank facilities and Frederick’s term debt on
more favorable terms.
Frederick’s new store designs and talented
personnel are expected to drive top line growth, while Movie Star’s
well-developed sourcing capabilities are expected to help increase gross
margins and improve operational efficiencies.
With its strong balance sheet, the combined company will embark on an accelerated
growth plan, including the opening of approximately 50 new Frederick’s of
Hollywood store locations within the next 36 months, and will continue to
expand and enhance Frederick’s successful online and catalog businesses.
Frederick’s will
continue to operate from its executive offices in Hollywood, CA with a
distribution center in Phoenix, AZ and Movie Star will continue to operate from
its executive offices in New York City with a distribution center in
Poplarville, MS. Both companies will retain
their seasoned leadership teams, with Linda LoRe, CEO of Frederick’s, and
Melvyn Knigin, CEO of Movie Star, continuing to lead their respective
businesses and reporting to the combined company’s Board of Directors. The Board will be primarily filled from the
respective boards of each of the two companies, and a new executive chairman
will be named at a later date.
Ms. LoRe stated, “We
are thrilled with this transaction, which represents a unique opportunity for
Frederick’s to build on the significant momentum we have in the marketplace and
further expand our retail presence in our target growth markets, as well as the
direct channel. Movie Star’s exciting
intimate apparel product designs and reliable contract manufacturing
capabilities will be a great benefit to Frederick’s, as we aim to add new
Frederick’s of Hollywood locations over the next three years and strengthen our
competitive position in the intimate apparel market, in retail stores as well
as in our online and catalog businesses.
At the same time, Frederick’s remains committed
to its successful model of partnering with a variety of highly qualified
vendors who supply us with innovative products and are a critical component of
our business mix.”
Mr. Knigin added, “The
proposed transaction is a wonderful opportunity for our shareholders. We will be able to participate in the growth
of one the world’s most prized intimate apparel brands as we execute our growth
plans. We look forward to continuing to
serve and strengthen our relationships with leading mass merchants, department
stores, national and regional chains and other retailers of branded and private
label intimate apparel, as well as our new partner, Frederick’s. We are extremely excited about working
together to create a stronger company with Frederick’s of Hollywood, one of the
most important names in the intimate apparel business.”
Frederick’s generated approximately $139
million in revenues for its fiscal year ended July 29, 2006. For the fiscal year ended June 30, 2006,
Movie Star had revenues of approximately $51 million.
The transaction, which is expected to close in
the second calendar quarter of 2007, is subject to approval by Movie Star
shareholders and other customary closing conditions. A fairness opinion was issued to Movie Star’s
special committee by Chanin Capital, LLC, a Duff & Phelps company.
FREDERICK’S OF
HOLLYWOOD has been recognized as one of the world’s most well-known brands,
with more than 130 specialty retail stores nationwide, a world-famous catalog
and online shop at www.fredericks.com. By keeping an eye toward modern Hollywood as
well as its own legendary history, FREDERICK’S OF HOLLYWOOD creates an innovative,
alluring product that is coveted by its customers and celebrities alike. With its exclusive product offerings
including Seduction by Frederick’s of Hollywood, Premiere Line and the
Hollywood Triple Feature bra, FREDERICK’S OF HOLLYWOOD is the Original Sex
Symbol™.
About Movie
Star, Inc.
Movie Star, Inc.
designs, manufactures (through independent contractors), imports, markets and
distributes women’s intimate apparel, including sleepwear, robes, leisurewear
and daywear, to mass merchandisers, specialty and department stores, discount
retailers, national and regional chains and direct mail catalog marketers
throughout the United States. Current
collections include the Cinema Etoile premium line of intimate apparel and the
Movie Star line of apparel sold as private label programs.
Additional Information About the Proposed Transaction and Where You Can
Find It
Movie
Star intends to promptly file a Current Report on Form 8-K including a more
detailed description of the merger and related transactions, which will include
copies of the transaction documents, including the merger agreement, as
exhibits. In connection with the
consideration of the transactions contemplated by the merger agreement, Movie
Star also intends to prepare and file a proxy statement and other relevant
materials with the Securities and Exchange Commission. BEFORE MAKING ANY VOTING DECISION WITH
RESPECT TO THE PROPOSED TRANSACTION, SHAREHOLDERS OF MOVIE STAR ARE URGED TO
READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The proxy statement and other relevant
materials, and any other documents filed by Movie Star with the SEC, may be
obtained free of charge at the SEC’s website at www.sec.gov. In addition, shareholders of Movie Star may
obtain free copies of the documents filed with the SEC by contacting Movie Star
at (212) 798-4700 or at 1115 Broadway, New York, NY 10010. You may also read and copy any reports, statements
and other information filed by Movie Star with the SEC at the SEC public
reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 or
visit the SEC’s website for further information about its public reference
room.
Participants in the Solicitation
Movie
Star and its executive officers and directors may be deemed to be participants
in the solicitation of proxies of Movie Star’s shareholders in favor of the
proposed transaction. A list of the
names of Movie Star’s executive officers and directors, and a description of
their respective interests in Movie Star, are set forth in the proxy statement
for Movie Star’s 2005 Annual Meeting of Shareholders, which was filed with the
SEC on October 25, 2005, and in any documents subsequently filed by its
directors and executive officers under the Securities and Exchange Act of 1934,
as amended. Certain executive officers
and directors of Movie Star have interests in the proposed transaction that may
differ from the interests of shareholders generally, including benefits
conferred under retention, severance and change in control arrangements and
continuation of director and officer insurance and indemnification. These interests and any additional benefits
in connection with the proposed transaction that are unknown as of the date of
this press release will be described in the proxy statement when it becomes
available.
Forward
Looking Statements
Certain of the matters
set forth in this press release are forward-looking and involve a number of
risks and uncertainties. Among the
factors that could cause actual results to differ materially are the following:
business conditions and growth in the industry; general economic conditions;
addition or loss of significant customers; the loss of key personnel; product
development; competition; risks of doing business abroad; foreign government
regulations; fluctuations in foreign rates; rising costs for raw materials and
the unavailability of sources of supply; the timing of orders booked; failure
to realize the merger’s anticipated synergies; approval of the transactions by
Movie Star’s shareholders and satisfaction of various other conditions to the
closing of the merger contemplated by the merger agreement; and the other risks
that are described from time to time in Movie Star’s SEC reports.
# # #