Tarrant Breaks Off Deal With Canadian Retailer

The deal is off between Tarrant Apparel Group—the decades-old Los Angeles apparel company known for its private-label blue jeans and its American Rag label sold at Federated-owned stores—and its Canadian competitor.

In early December, Tarrant announced it would purchase certain assets of The Buffalo Group—a Montreal company that makes contemporary men’s and women’s clothing for 16- to 35-year-old customers and is known for its hip denim wear—for $120 million. The Buffalo Group also operates more than 45 stores in Canada under the Buffalo by David Bitton nameplate.

On April 26, Tarrant issued a statement saying the two companies had mutually agreed to terminate the deal. As part of the termination agreement, Buffalo returned $4.75 million of Tarrant’s $5 million deposit.

“Our mutual decision to terminate the agreement was not made lightly,” said Gerard Guez, chairman and interim chief executive officer of Tarrant Apparel. “While we are disappointed that we were unable to conclude the transaction, Tarrant and Buffalo believe that it is in the best interest of both parties to operate independently at this time.”

Tarrant had offered to pay $40 million in cash, $16 million in promissory notes, 13 million shares of Tarrant Apparel common stock and earn-out payments of $12 million over four years for The Buffalo Group.

Tarrant Apparel, which was founded in 1985, has had a few rough financial years. In fiscal 2006, it lost $22.2 million on $232.4 million in sales. In fiscal 2005, it had net earnings of $1 million on $214 million in sales. But the company had a net loss in fiscal 2004 of $104.7 million on sales of $155 million. It also lost $35.9 million in fiscal 2003.—Deborah Belgum