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Tiffany Montgomery
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An interview with the Adrenalina CEO

By Tiffany Montgomery
October 20, 2008 9:45 AM

I reached Adrenalina CEO Ilia Lekach this morning to talk to him about his bid to acquire Pacific Sunwear for $4.50 a share.


I am trying to get a comment PacSun as well and will post it as soon as possible.


Here's what Ilia had to say:


The plan: Ilia envisions keeping PacSun stores under the same name but would update them with more "spirit" to be more relevant to today's kids. He said little by little, PacSun has become less relevant to its customers.


"We would make them more relevant - a little more like Zumiez," he said. He would include private label Adrenalina clothes to the current vendor mix.


"I'm a surfer, my son's a surfer," he said. "We understand what this customer wants. PacSun is facing huge competition from many others at the mall, including Macy's."


He would then use Pacific Sunwear's infrastructure to open more Adrenalina stores. The stores are typically 12,000 square feet and include a wave pool. He said one million people visit the stores a year and mall developers are hot to open more stores to drive traffic at their centers. Ilia said mall developers are paying the costs to build the stores, typically about $2 million.


Teaming up with PacSun would allow Adrenalina to meet the demand for its stores, he said.


Adrenlina currently operates three stores and has signed leases to open four more in Atlanta, Houston, Denver and Dallas, according to a company filing with the SEC.


Ilia would also use PacSun's expertise to expand Adrenalina's private label program. He said the Adrenalina name is well known from its TV show and magazine so he believes the private label program has lots of potential.


Financing: Given that Adrenalina has a small number of stores and a net loss of $4 million for the first six months of the year, I asked how the company would finance the purchase of PacSun, which would cost approximately $295 million at the current stock price.


He said the deal would be financed by private individuals, institutions and synergistic partners. As we were speaking, Ilia said he received an email from a major industry vendor asking how that person could help make the deal happen.


"I'm highly confident we can finance it," he said. "What I'm nervous about, is I want to sit down and talk with the board."

 

 


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