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Trans World CEO Seeks Return to Privacy

12 Nov, 2007 By: Kyra Kudick

Robert Higgins, founder, chairman, CEO and largest individual shareholder of Trans World Entertainment, has formally proposed purchasing the retailer's outstanding stock in an effort to take the company private.

The nonbinding bid, submitted Nov. 9 to Trans World's board, would involve purchasing about 31 million outstanding shares, according to a regulatory filing.

Higgins, who owns about 40% of Trans World shares, said he would pay $5 cash per share, contingent upon obtaining third party financing and the board's approval.

The CEO said he has contacted shareholder Bryant Riley (3.7 million shares) to gauge his interest in the $75 million transaction.

The board has established a special committee of non-management members to review the proposal.

Albany, N.Y.-based Trans World, founded by Higgins in 1972 and dubbed “the last standing entertainment retail chain,” operates more than 950 stores, primarily under the F.Y.E. (For Your Entertainment) and Suncoast brands.

The company lost $10.1 million in the second quarter (ended Aug. 4) and has struggled as packaged media music sales continue to overshadow gains in sales of new and used DVD movies.

Higgins has publicly stated he would no longer personally buy back Trans World shares but the ongoing sluggish environment for entertainment retail underscores the need for increased cost cutting.

Analysts say returning to privately held status would eliminate accounting, administrative and legal costs associated with being public.

“It is an obvious turnaround type of situation,” said an analyst who no longer covers Trans World and wishes to remain anonymous. “When you need to report every quarter to stock holders, it makes it difficult to implement programs that take more than a quarter to take effect.”

With the imperative holiday shopping season upon us, the analyst said the transition would allow Trans World the breathing room needed to implement changes outside the watchful eye of Wall Street.

“It could be X number of years down the road if they are able to turn the ship around and bring it public again,” the analyst said.

Trans World stock Nov. 12 was up 2 cents to $4.98 per share in mid-afternoon trading.

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