Cherokee (CHKE) Prices 3.685M Share Stock Offering for Proceeds of ~$35M; Enters Hi-Tec Acquisition Documents

November 29, 2016 8:49 AM EST

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Entry Into Hi-Tec Acquisition Documents

Cherokee Inc. (Nasdaq: CHKE) announced that it has entered into a definitive agreement to acquire all issued and outstanding share capital of Hi-Tec Sports International Holdings B.V. (“Hi-Tec”), a global footwear company, for an aggregate cash purchase price of approximately $95.8 million on a cash-free debt-free basis, based on normalized working capital (the “Hi-Tec Acquisition”). Subject to post-closing adjustments, and after giving effect to the asset sales and the other transactions described below, we expect that the purchase price for the Hi-Tec intellectual property assets to be retained by us will be approximately $62.0 million.

The Company has entered into definitive agreements to sell certain assets related to Hi-Tec’s wholesale operations to new operating partners, the proceeds of which will be used to fund a portion of the Hi-Tec Acquisition. Prior to or in connection with the closing of the Hi-Tec Acquisition, the new operating partner licensees have entered or will enter into license agreements with Cherokee, pursuant to which each operating partner will pay the Company royalties for the future use of certain Hi-Tec intellectual property. To fund a portion of the purchase price, the Company also entered into a commitment letter for a new $50 million credit facility with Cerberus Business Finance, LLC and a commitment letter for a $5 million receivables funding loan to be provided by Mr. Jess Ravich, Chairman of the Company’s Board of Directors.

Pricing of Public Offering of Common Stock

The Company also today announced that it has priced an underwritten public offering of 3,685,000 shares of its common stock at a public offering price of $9.50 per share for total gross proceeds of approximately $35 million. Additionally, the Company has granted the underwriters a 45-day option to purchase up to an additional 552,750 shares to cover over-allotments, if any. The offering is expected to close on or about December 2, 2016, subject to customary closing conditions.

The Company expects to use the net proceeds from the offering to fund a portion of the Hi-Tec Acquisition. To the extent that the net proceeds are not applied to the Hi-Tec Acquisition, the Company intends to use such proceeds for general corporate purposes.

Roth Capital Partners is the sole manager for the offering.

A registration statement relating to shares of the common stock of Cherokee has been declared effective by the Securities and Exchange Commission (SEC) on July 2, 2015. A copy of the final prospectus for the offering will be filed with the SEC and when filed, will be available on the SEC's website located at http://www.sec.gov and may also be obtained from Roth Capital Partners, LLC, 888 San Clemente Drive, Suite 400, Newport Beach, California 92660, by telephone at (949) 720-7227, or by email at rothecm@roth.com.



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