American Apparel shareholder Dov Charney will now receive a total of 37,258,065 shares of Endeavor, an increase of 5 million shares which are still subject to a 3-year lock-up.  The maximum level of American Apparel net debt at the merger closing date has been raised to $150 million, up from the $110 million ceiling in the original agreement.  Mr. Charney has entered into a 3-year employment agreement at $750,000 per year with up to a 150% performance based bonus and a long-term performance bonus of up to 300%; and this is a change from the initial $1 salary he was set to receive.   Endeavor will also increase the employee stock option and stock plans to 7.71 million shares from 2.71 million shares in the original agreement.  The additional shares for Mr. Charney will maintain his approximate 55% ownership position in the pro forma company as intended per the originally proposed transaction.

The reasons are pretty easy to see.  The company has 20 new store openings planned.  But the growth numbers were big here.  It posted third quarter same store sales growth at 27%. Its first 9-months EBITDA looks to exceed $40 million, which was its goal for all of 2007. As of October 31, 2007, American Apparel operated 166 retail stores in 13 countries.

The special meeting of stockholders to consider the transaction is expected to be held Wednesday, December 12, 2007.  You can guess that the shareholders will approve this transaction.  Endeavor’s closing price was $12.32 yesterday, and the 52-week range is $7.32 to $13.15.

Jon C. Ogg
November 8, 2007

Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.