Dejaiz stores' revival hinted Former president of Merry-Go-Round unit linked to deal

February 07, 1996|By Alec Matthew Klein | Alec Matthew Klein,SUN STAFF

Lou Spagna, a former executive of Merry-Go-Round Enterprises Inc., is looking to resurrect a piece of the business -- Dejaiz -- the division of the chain that he used to run, sources said.

Mr. Spagna has forged a partnership with JNCO, a Los Angeles supplier of fashion clothing, to acquire Dejaiz, the sources said. Under new ownership, Dejaiz likely would hire many former Merry-Go-Round employees. Such a move could save jobs for some of the more than 6,000 workers who are being laid off during the Joppa company's liquidation over the next several months.

The deal also would generate cash for Merry-Go-Round creditors who are clamoring for payment. Dejaiz, a chain of brand-name urban street clothing, already has a wide expanse of 136 stores in the Northeast, including units in New York City, northern New Jersey, and southern New England, along with Detroit, Chicago and parts of Florida, Texas and California.

Mr. Spagna, reached at home, declined to comment on the deal yesterday. But, he said, "If any way can be found to save a piece of Merry-Go-Round and save some jobs in the process, that would be a very good thing. I feel very strongly about that."

For Mr. Spagna, 46, the acquisition of Dejaiz would be a striking reversal. Less than three months ago, he was forced out of Merry-Go-Round as president of the Dejaiz division by Merry-Go-Round's latest chief executive officer, Richard P. Crystal.

Mr. Spagna came to Merry-Go-Round on June 1, 1994, as president of the Dejaiz and Chess King divisions, and established himself as a popular leader among his employees.

But his standing fell quickly after Mr. Crystal's arrival in July. Mr. Spagna was stripped of his responsibilities at the 215-store Chess King division in August. He left the company Nov. 11 during a round of huge layoffs.

Before his stint at Merry-Go-Round, Mr. Spagna was president of the retail division of Bugle Boy in Simi Valley, Calif. And he was executive vice president and general manager of Chess King before Merry-Go-Round acquired the chain in May 1993 for $46.2 million from the Melville Corp. of Rye, N.Y.

In other action, Stephen Selbst, attorney for the official equity committee representing Merry-Go-Round shareholders, has asked the trustee overseeing the case in U.S. Bankruptcy Court to look into company shares traded by Stephen N. Wertheimer and Alan E. Berkowitz, both members of the company's board of directors.

Mr. Wertheimer sold 23,000 shares Dec. 29, when the stock was trading at 38 cents per share, records show, a little more than a month before the stock closed yesterday unchanged at 1.56 cents. Mr. Berkowitz reportedly sold shares on behalf of the Goldsmith trust last year, according to Mr. Selbst.

"There's a question about whether any of the insiders have engaged in improper trading based on inside information," Mr. Selbst said.

He would not comment on the prospect of a shareholders' lawsuit.

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