Investor says Wet Seal backs out of agreement

NEW YORK -- The Clinton Group Inc., which is in a proxy fight with Wet Seal Inc., said Wednesday that the retailer has reneged on an offer to give up majority control of its board.

The activist investor, which has a roughly 7 percent stake in the company, has been vocal about its displeasure with the company's performance. It has urged the retailer's board to sell the company in the past and announced in September that it would seek nomination for its own slate of directors to replace most of Wet Seal's board.

Wet Seal has resisted the group's plans.

However the Clinton Group said that Wet Seal's banker contacted the firm on Tuesday and said "It appears you have won". The banker told the Clinton Group that four of the company's board members were willing to resign if Clinton Group agreed to settle the consent solicitations, according to a filing with the Securities and Exchange Commission on Wednesday.

The deal appeared to be nearly done and both sides discussed plans to document the agreement and create a press release. Clinton Group said that it got a call late Tuesday from the investment banker again, who said that the board had changed its mind and the directors would not resign.

Wet Seal declined to comment.

"The time for change is now," Joseph De Perio, senior portfolio manager of Clinton Group said in a statement.

Shares of Wet Seal fell 2 cents to close at $3.16.