Progress Illinois

Earlier today, we noted that Wells Fargo announced its opposition to a bid from a British private equity firm to take over bankrupt suitmaker Hartmarx (which the bank has largely financed).  The Wells Fargo statement frames their position as in the best interest of the Hartmarx workers, asserting that bidder Emerisque intends to close the company's Rock Island plant in the near term:

Emerisque’s offer requires selling significant pieces of Hartmarx soon after the acquisition, risking Hartmarx jobs at several U.S. factories and distribution centers.  Specifically, Emerisque has committed to sell Hartmarx factories in Rock Island, Ill., and Cape Girardeau, Mo., and its distribution centers in Easton, Penn., and Rector, Ark., all within three months of the acquisition. 

But Bruce Raynor of Workers United, the union that represents the Hartmarx employees, begs to differ.  This afternoon, he released the following statement:

The Emerisque bid is good for Hartmarx’s and its workers.  It is good for Wells Fargo and the Wells Fargo shareholders.  Wells Fargo’s statement is a thinly veiled attempt to force liquidation.  It is outrageous for a bank that has received billions in taxpayer money to reject Emerisque’s generous bid to save the company and thousands of good jobs.

The union has an understanding with Emerisque that it will assume Hartmarx‘s obligations to their employees including the union contract obligations.  In addition Emerisque will not close the Rock Island Illinois facility. Emerisque is committed to the 'Made in America' label for Hickey Freeman and Hart Schaffner & Marx.  These are the kind of good union jobs that are needed in our currently depressed economy. We call on Wells Fargo, recipient of 25 billion dollars in taxpayer support, to have a similar commitment to American jobs.

In the bid, Emerisque apparently lists the Rock Island plant as security on a "junior secured note" valued at $15 million.  If Emerisque were unable to pay down that note, the factory would be at risk.  But there appears to be no basis for Wells Fargo's assertion that they have "committed" to selling that plant "within three months of acquisition."

The Tribune, New York Times, and WBEZ have more coverage of the Wells Fargo announcement.

UPDATE (5:25 pm): Emerisque has released a statement as well (which we've posted in full).  An excerpt:

The only factual component of the Wells Fargo statement today is that they believe they should realize a higher cash return on their claim.

There is a significant gap between their expectations and the reality of where asset valuations are in the current market. Hartmarx ran a sale process that has lasted almost four months before selecting Emerisque as the stalking horse bidder. The fact that the highest bid was selected after such a lengthy process surely tells its own story. The Emerisque bid is fully diligenced, and financing and ability to close are as certain as is possible at this stage of the process and in this environment.  Any suggestion otherwise is simply not truthful.

Furthermore, all that a stalking horse does is establish a 'floor' value for an auction. It would appear to us that Wells Fargo prefers a liquidation.

UPDATE II (6:20 pm): Rep. Phil Hare, who worked for 13 years at the Rock Island plant, just released this statement:

“Wells Fargo’s announcement today that they are rejecting Emerisque’s bid for Hart Schaffner Marx is at best cynical and at worst deceitful. They had a legitimate offer on the table and claimed they would bargain in good faith toward a resolution that keeps the company and its jobs intact. Today, Wells Fargo showed their true colors by misrepresenting Emerisque’s bid and moving toward liquidation. I will continue to work with my colleagues in Congress to get the process back on track so we can save this American icon and its loyal and dedicated workforce.