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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MAY 12, 1998
GANTOS, INC.
(Exact name of registrant as specified in its charter)
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MICHIGAN 000-14577 38-1414122
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification
incorporation) No.)
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1266 E. MAIN STREET, FIFTH FLOOR, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 358-0294
N/A
(Former name or former address, if changed since last report)
Page 1 of 7 Pages
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ITEM 5. OTHER EVENTS.
On May 12, 1998, Gantos, Inc. (the "Company") entered into a definitive
Agreement and Plan of Merger (the "Merger Agreement") with Hit or Miss Inc.
("Hit or Miss") and HOM Holding, Inc., the sole stockholder of Hit or Miss
("HOM Holding"), regarding the merger of HOM Holding with and into the
Company. Pursuant to the Merger Agreement and by operation of law, the
Company would acquire the assets and assume the liabilities of HOM Holding,
including all of the outstanding Capital Stock of Hit or Miss, for an
aggregate of approximately 7.4 million shares of Company common stock and
warrants to purchase 1.25 million shares of Company common stock for $1.50
per share. The warrants would not be immediately exercisable.
In the merger, Access Capital Partners, L.P., the principal stockholder
of HOM Holding ("Access Capital"), will receive approximately 7.0 million
shares, or approximately 47%, of the issued and outstanding common shares of
the surviving corporation and, upon exercise of the warrants, if and when
exercised, Access Capital and affiliated entities will have received
approximately 8.2 million shares, or approximately 50%, of the issued and
outstanding common shares of the surviving corporation. Following the
completion of the merger, the Board of Directors of the surviving corporation
(which will continue as Gantos, Inc.) will consist of seven individuals, three
of whom will be nominees of HOM Holding and four of whom will be continuing
Board members of the Company. The Bylaws will initially provide that
substantially all actions of the Board of Directors of the surviving
corporation will require the affirmative vote of more than 70% of the Board.
Hit or Miss will be operated as a separate subsidiary of the Company. The
Company expects, subject to the satisfaction of all conditions, to consummate
the merger on or before August 31, 1998. Under certain conditions, if the
Merger Agreement is terminated or the merger is not consummated, the Company
or HOM Holding may be entitled to a fee as liquidated damages.
The Company and HOM Holding have also entered into a Stockholder Voting
and Proxy Agreement whereby Access Capital and certain other stockholders of
HOM Holding, who collectively own approximately 96% of the voting stock of
HOM Holding, have agreed to vote in favor of the merger and, so long as they
own shares, to elect the continuing Board members of the Company to the Board
of Directors of the surviving corporation for a period of three years.
In connection with the merger, the parties have received a proposal,
which has received credit committee approval, to refinance the working
capital facilities of the Company and Hit or Miss into a combined $60 million
facility. The consummation of the transactions contemplated by the Merger
Agreement is subject to several material conditions including, among others,
the consummation of the above-described financing, the approval of the
merger by the stockholders of the Company and HOM Holding, the waiver of
certain covenants of the debtholders of the Company and Hit or Miss, the
receipt of all necessary approvals under the Hart-Scott-Rodino Antitrust
Improvements Act and the absence of adverse changes to the businesses of the
Company and Hit or Miss. There can be no assurance that the Company will be
successful in closing the above-described merger with HOM Holding and Hit or
Miss. A press release describing the merger is attached hereto as Exhibit
99.1 and incorporated by reference herein.
Page 2 of 7 Pages
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This Current Report on Form 8-K contains forward-looking statements,
which are based on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the Company's control.
Actual results could vary materially from expected results due to a variety
of factors, including, but not limited to, the Company's ability to stem
recurring losses from operations which led the Company's independent
accountants to issue a "going concern" opinion for the financial statements
for the year ending January 31, 1998, the general performance of the
economy, specifically as it affects the retail apparel industry, the
Company's ability to amend its Indenture or refinance the related notes, the
Company's ability to comply with the Fleet facility liquidity requirements,
the level of support of the Company's trade creditors and factors, the
Company's comparable store sales changes, the Company's ability to obtain
merchandise, and other factors applicable to the Company and its business
referred to in the Securities and Exchange Commission filings of the Company,
particularly the Company's Annual Report on Form 10-K for the year ended
January 31, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Press release, dated May 13, 1998.
Page 3 of 7 Pages
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GANTOS, INC.
By: /s/ Arlene H. Stern
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Arlene H. Stern
President and Chief Executive Officer
Date: May 14, 1998
Page 4 of 7 Pages
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated May 13, 1998.
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GANTOS, INC.
FOR IMMEDIATE RELEASE CONTACT: DAVID NELSON
(203-358-0294)
GANTOS, INC. ANNOUNCES EXECUTION OF
MERGER AGREEMENT WITH HIT OR MISS INC.
STAMFORD, CT, May 13, 1998 -- Gantos, Inc. (Nasdaq:GTOS) announced that
it has signed an Agreement and Plan of Merger with Hit or Miss Inc. and HOM
Holding, Inc., the sole stockholder of Hit or Miss, regarding the merger of
HOM Holding with and into Gantos. Pursuant to the merger agreement, Gantos
would acquire Hit or Miss for an aggregate of approximately 7.4 million
shares of Gantos common stock and warrants to purchase 1.25 million shares of
Gantos common stock for $1.50 per share. The warrants would not be
immediately exercisable.
In the merger, Access Capital Partners, L.P., the principal stockholder
of HOM Holding will receive approximately 7.0 million shares, or
approximately 47% of the issued and outstanding common shares of the
surviving corporation and, upon exercise of the warrants, if and when
exercised, Access Capital and affiliated entities will have received
approximately 8.2 million shares, or approximately 50% of the issued and
outstanding common shares of the surviving corporation. Following the
completion of the merger, the Board of Directors of the surviving corporation
(which will continue as Gantos, Inc.) will consist of seven individuals,
three of whom will be nominees of HOM Holding and four of whom will be
continuing Board members of Gantos. The Bylaws will initially provide that
substantially all actions of the Board of Directors of the surviving
corporation will require the affirmative vote of more than 70% of the Board.
Hit or Miss will be operated as a separate subsidiary of Gantos. The Company
expects, subject to the satisfaction of all conditions, to consummate the
merger on or before August 31, 1998. Under certain conditions, if the merger
agreement is terminated or the merger is not consummated, Gantos or HOM
Holding may be entitled to a fee as liquidated damages.
Gantos and HOM Holding have also entered into a voting agreement whereby
Access Capital and certain other stockholders of HOM Holding, who
collectively own approximately 96% of the equity of HOM Holding have agreed
to vote in favor of the merger at the HOM meeting, and so long as they own
shares, to elect the Gantos continuing Board members to the Board of
Directors for a period of three years.
In connection with the merger, the parties have received a proposal,
which has received credit committee approval, to refinance the working
capital facilities of Gantos and Hit or Miss into a combined $60 million
facility. The consummation of the transactions contemplated by the merger
agreement is subject to several material conditions including, among others,
the consummation of the above-described financing, the approval of the merger
by the stockholders of Gantos and HOM Holding, the waiver of certain
covenants of the debtholders of Gantos and
Page 6 of 7 Pages
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Hit or Miss, the receipt of all approvals under the Hart-Scott-Rodino
Antitrust Improvements Act and the absence of adverse changes to the
businesses of Gantos and Hit or Miss.
Arlene Stern, President & Chief Executive Officer of Gantos, stated that
"We are pleased to partner with Hit or Miss in a merger, which we view as a
significant step in improving our position in the women's apparel
marketplace. While we recognize the individuality of our two retail formats
and that we target a different customer base, both companies believe that
there are significant synergies to make this a strong combination. Our
respective executive teams have already identified a number of potential
operational commonalities where financial synergies exist. During the merger
process, our focus will be maintaining our businesses, vendor and landlord
relationships and service to our customers. Our strategy going forward is to
build on mutual strengths in merchandise sourcing, operational effectiveness,
and distribution capabilities, in order to improve our long-term
profitability."
Nesim Avigdor, President & Chief Executive Officer of Hit or Miss stated
that "Hit or Miss is delighted with the opportunities this merger represents.
We look forward to working with our new partners at Gantos to develop a new
company which we hope will generate significant returns to our investors,
present outstanding values to our customers and provide outstanding
opportunities for our employees."
This news release contains forward-looking statements, which are based
on Gantos' expectations and are subject to a number of risks and
uncertainties, certain of which are beyond Gantos' control. Actual results
could vary materially from expected results due to a variety of factors,
including, but not limited to, the Company's ability to stem recurring losses
from operations which led Gantos' independent accountants to issue a "going
concern" opinion for the financial statements for the year ending January 31,
1998, the general performance of the economy, specifically as it affects the
retail apparel industry, the Company's ability to amend its Indenture or
refinance the related notes, the Company's ability to comply with the Fleet
facility liquidity requirements, the level of support of the Company's trade
creditors and factors, the Company's comparable store sales changes, the
Company's ability to obtain merchandise, and other factors applicable to
Gantos and its business referred to in the Securities and Exchange Commission
filings of Gantos, particularly Gantos' Annual Report on Form 10-K for the
year ended January 31, 1998.
Page 7 of 7 Pages
