FRESNO A Chinese company that promised a $30 million lifeline to Gottschalks Inc. has pulled out of its deal with the Fresno-based department store chain.
In a filing Thursday with the U.S. Securities and Exchange Commission, Gottschalks officials reported that Everbright Development Overseas Ltd. opted this week to cancel the agreement, which would have given it a majority stake in the struggling retailer.
In the filing, Gottschalks Chief Operating Officer Greg Ambro said Everbright "exercised its right to terminate the investment agreement."
Gottschalks officials were unavailable to comment Thursday afternoon.
Everbright, founded by a former high-ranking official in China's communist government, had signed the deal with Gottschalks on Nov. 20.
The cancellation came at the end of a due-diligence period that ended Monday.
The deal called for Everbright to purchase 75 percent of Gottschalks stock at $1.80 per share, providing the company with a cash infusion of up to $30 million. Gottschalks stock closed Thursday at 45 cents a share, unchanged from Wednesday's close.
Everbright is nominally registered as a corporation in the British Virgin Islands, but its roots and operations are in China.
Gottschalks officials said when the deal was made that the partnership would give the retailer access to low-cost private-label products from Chinese manufacturers, improving the retailer's profit margin.
Gottschalks, founded in 1904, operates 58 department stores, including two in Modesto, and three specialty clothing stores throughout the Western United States.
Like many retailers, it has seen sales slip and earnings tumble over the past year.
In the first three quarters of 2008, Gottschalks has reported losses of $19.7 million, or $1.48 per share. The company's fiscal year begins in February. Gottschalks last reported a profitable quarter in the final three months of its 2007 fiscal year, when the company gained $1.1 million.
Besides buying 40 million shares of Gottschalks stock and making cash contributions or loans of up to $15 million, the Everbright deal would have allowed the Chinese company to buy up to 114 million more shares.