Mossimo Founder Makes Bid to Buy Back Shares, Take Company Private

Mossimo Inc. founder Mossimo Giannulli wants to buy the shares in the company that he doesn’t already own for $4 each, a 20% premium over Monday’s closing price, the Santa Monica clothing design company said Tuesday.

The news sent the shares up 25% on Nasdaq. They hit a 52-week high of $4.50 during Tuesday’s trading before closing up 82 cents at $4.14.

That put a $63-million value on the company based on the number of shares outstanding. Giannulli owns about 65% of them.

If shareholders approve the bid and Giannulli is able to take the company private again, it would add another chapter to a story that began almost two decades ago when the designer began making neon-colored volleyball shorts and T-shirts in his garage.

Over time, the Mossimo brand rose from surf shops to fashion aisles and became the toast of Wall Street as Giannulli tried to follow in the footsteps of Ralph Lauren or Calvin Klein.

But sales plunged after what retailers and fashion experts said was too rapid a scramble up the fashion ladder. Competition for department store space, where the brand increasingly was sold, also was intense.

Pushed to the brink of bankruptcy, Giannulli announced in 2000 that he was licensing his brand to Target Corp. Although some saw that as a major comedown for the designer at the time, the discounter became “a cash cow� for Mossimo, said analyst Jeffrey Van Sinderen at B. Riley & Co.

It makes sense now for the company -- which designs, licenses and distributes clothes and accessories for men, women and children -- to go private and shed the burdensome demands of a public company, which are particularly hard on smaller businesses, Van Sinderen said.

“The company probably is better off as a private company,� he said.

With fewer distractions, Mossimo also can continue focusing on building its Modern Amusement brand, a hip apparel brand for male teens and young men that it bought last year for $375,000. The brand sells in stores that lure the trend-hungry, including Urban Outfitters and Fred Segal.

Eventually, Van Sinderen said, Mossimo might decide to go public again.

Mossimo as a highflier was a $100-million enterprise; sales last year were $20.5 million. That compared with $19.9 million in 2003. The increase was largely related to the $1.8 million in revenue generated by Modern Amusement. Revenue from Target slipped 7% last year from 2003 as shoppers cooled to the Mossimo brand.

Profit last year was $2.7 million, or 17 cents a share, compared with $4.57 million, or 29 cents, in 2003.

President and co-Chief Executive Edwin Lewis, who resigned after the Target deal was struck and later returned, had called 2004 “a period of transition.�

In addition to the Modern Amusement purchase, the company invested in infrastructure to improve sales at Target, struck a licensing deal with Intermoda in Mexico and restructured its operations at Zellers, a Canadian retail chain that sells the brand under a licensing deal.

The company’s statement said Giannulli expected the board of directors to form a special committee of independent directors to consider his proposal, assisted by outside legal and financial advisors.

It also said that Giannulli had advised the board that he wouldn’t consider any other transaction involving his interest in the company.