Cutter & Buck should beware of pirates. Pirate Capital began scooping up shares last year in the struggling sportswear retailer and...

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Cutter & Buck should beware of pirates.

Pirate Capital began scooping up shares last year in the struggling sportswear retailer and now is its largest shareholder.

Pirate’s Jolly Roger Fund added 5,000 more shares to its spoils Monday, giving it a nearly 13 percent stake in Cutter & Buck. It has purchased most of its shares in the $12 to $15 range.

At yesterday’s stock close of $12.75, the stake is worth about $18 million.

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The hedge fund based in Norwalk, Conn., declined to comment on its interest in the Seattle company.

But it bills its Jolly Roger Fund, which owns the Cutter & Buck stake, as a means to “aggressively take advantage of opportunities in undervalued and distressed companies,” according to its member description on The Hedge Fund Association Web site.

Cutter & Buck Chief Financial Officer Ernest Johnson said the company has had “normal conversations” with Pirate Capital, as it does with other shareholders. He declined to comment further.

Philip Garon, a senior mergers-and-acquisitions attorney with Minneapolis-based Faegre & Benson, said companies become vulnerable to a hostile takeover when their stock is undervalued and they have excess cash.

Takeover specialists tend to acquire a significant stake, then wage a proxy contest to replace the company’s board, Garon said.

Pirate’s Jolly Roger Fund in February launched a proxy contest to take over the entire board of Houston-based prison-services provider Cornell Cos. at its annual meeting.

Cutter has worked to regain its footing following an accounting scandal.

The company in December 2000 was forced to restate financial results back to 1998 to correct inflated sales figures. Three former employees were sentenced in the cover-up.

The company posted a profit of $5.8 million, or 51 cents a share, on $91.7 million in sales for the nine months ended Jan. 31. It reported $43.7 million in cash and marketable securities.

Cutter & Buck adopted a shareholder-rights plan in November 1998 that allows shareholders to buy stock at a premium if a third party acquires 20 percent or more of the company.

Called a poison pill, the provision is designed to dilute the third party’s ownership in the company and make it less appealing.

Lawrence Hamermesh, a professor at Widener University School of Law, said the most effective way for a bidder to get around a poison pill is to elect its own slate of directors.

Cutter and Buck’s annual meeting is in October.

Monica Soto Ouchi: 206-515-5632 or