Pier 1 Imports Responds to Cost Plus Announcement

June 16, 2008  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on June 2008 Pier 1 Imports Inc., Fort Worth, Texas, announced yesterday it would take its proposal to acquire Cost Plus directly to Cost Plus shareholders after management’s rejection of its offer.

“We are disappointed in the Cost Plus Board’s recommendation, which fails to recognize the significant value inherent in a combination of our two companies,” said Alex Smith, president and CEO of Pier 1 Imports, in a response to a letter from Cost Plus management that turned down the proposal. “Our strategic stock-for-stock proposal is extremely compelling, and we believe that it would create significant value for the stakeholders of both companies. We are surprised that the Cost Plus Board determined that our proposal was not in the best interests of the Cost Plus shareholders—given that the Cost Plus Board and management have made no effort to discuss with us the potential and benefits of a mutually acceptable transaction. In addition, as originally outlined, our proposal is subject to only limited conditions that are customary for transactions of this type, which are confirmatory due diligence, the negotiation of a definitive acquisition agreement, and the receipt of all necessary shareholder and regulatory approvals. Nevertheless, we intend to work directly with the shareholders of Cost Plus to make this transaction a reality.”

On June 9, Pier 1 had announced its proposal to acquire all the outstanding shares of Cost Plus common stock in a stock-for-stock transaction. Under the terms of the proposal, Pier 1 Imports would issue 0.6 shares of its common stock for each share of Cost Plus common stock. Based on the closing prices of Pier 1 Imports and Cost Plus on June 6, the proposed exchange ratio implied a value of $4 for each share of Cost Plus common stock. The proposal represented a premium of approximately 31 percent over the Cost Plus closing price on June 6.

On a letter dated Monday, management of Cost Plus, Oakland, Calif., rejected the Pier 1 offer.

JPMorgan is acting as financial advisor to Pier 1 Imports, and Gibson, Dunn & Crutcher LLP and Bracewell & Giuliani LLP are acting as legal counsel.