Eddie Bauer's investors: No sale

SEATTLE - Eddie Bauer shareholders Thursday morning voted against selling the company to two private-equity firms.

The company had held the special shareholders meeting today in Bellevue to determine whether to sell the company to Sun Capital Partners and Golden Gate Capital for $9.25 a share, or $285 million.

The meeting was adjourned for 25 minutes as last-minute votes were counted.

When Chairman William End announced the vote, the room - filled mostly with directors and executives - seemed surprised. The board declined comment, quickly convening a meeting to discuss the vote.

"We're going to go back to work," said Chief Executive Fabian Mansson."To us, this is business as usual."

An Eddie Bauer spokesman said the shareholder vote count wasn't yet available. In a statement, the company said it would continue to operate as a stand-alone, public company while the board evaluates its next step.

Asked for approval

In a proxy filing, the board of directors had asked shareholders to approve the merger, saying it would be difficult to continue to operate Eddie Bauer on a stand-alone basis given a substantial decline in sales and the inability of several management teams to execute a turnaround.

Net merchandise sales have declined since 2000, and same-store sales - a key metric that measures the performance of stores open a year or more - have fallen in 23 of the previous 27 quarters, the proxy said.

In lieu of a sale, Eddie Bauer said it would either take on more debt or refinance its existing debt on unfavorable terms. What's more, Eddie Bauer's declining sales per square foot has made it difficult to enter into new store leases in desirable locations and to compete for existing leases with "more attractive tenants," the proxy said.

Wall Street analysts have long considered Eddie Bauer ripe for sale.

The outdoor-apparel retailer, founded in 1920, became an independent company in June 2005 for the first time in 35 years after parent Spiegel Group filed for bankruptcy.

Under its reorganization plan, Spiegel transferred its stake in Eddie Bauer to its creditors as the newly formed Eddie Bauer Holdings.