In October we reported about the proposal that Adrenalina, the action sports retail chain, put in a bid for buying or merging with the mega action sports chain, PacSun. At the time, Adrenalina (adrenaline in Spanish) CEO Ilia Lekach offered to buy all outstanding stock of PacSun at $4.50 per share and submitted the proposal to PacSun after Kasaks supposedly declined the offer several times.

Adrenalina is an “extreme” sports chain that is mostly known for having Flowrider machines within their stores that allow people to try out surfing. Adrenalina is different than Zumiez and PacSun in terms of action sports, in that they also offer up goods for skimboarding, kiteboarding, paintball, inline skating, and of course, Flowriding.

Often regarded by the action sports industry as not “core” by traditional action sports standards, Adrenalina has taken over many malls near you. Their concept, after their initial launch in October 2006, was to make what they still coin as “extreme” sports to the masses, particularly 12-24-year-olds, and mostly through surfing with their proprietary Flowrider machine. So while each Adrenalina store offers up much of what PacSun and Zumiez offer in terms of brands, they also try to offer an interactive experience with Flowrider sessions–surfing in a manmade wave tank–which costs between $20 for a half hour session and up.

In the last 2 years, Adrenalina has spread into large malls such as Miami International Malls, Orlando’s Florida Mall, Willow Bend Mall in Plano, TX, and into New Jersey, among other areas.

Adrenalina also has a TV channel called of course, which covers various events that the store chain hosts and other competitions. Interestingly, the channel is offered in both English and Spanish.

Fast-forward to Monday, December 15, and Adrenalina went at it again, addressing PacSun CEO Sally Fram Kasaks to consider the merger of the two brands based on the fact that PacSun has a substantial store footprint and Adrenalina is known for their “entertainment” retailing concept (i.e., the in-store Flowrider). Together, according to Adrenalina’s letter, they would be better off delivering value in this challenging economic environment.

In responses, PacSun issued a letter back to Adernalina and said it was again not going to consider this possibility based on several factors:

1) Adrenalina%uFFFDs auditors have indicated that there is substantial
doubt as to the company%uFFFDs ability to continue as a going concern.
Note 2 to the financial statements included in Adrenalina%uFFFDs Report
on Form 10-Q for the quarter ended September 30, 2008 also states:
“The Company continued to incur significant operating losses
through the nine months ended September 30, 2008 which raise
substantial doubt about the Company%uFFFDs ability to continue as a
going concern.”

5. Adrenalina%uFFFDs market capitalization as of the date of this letter
is approximately $14 million, based on the closing trading price
of Adrenalina%uFFFDs stock on December 12, 2008.

The letter concluded with the following statement: “You also state in your November 20 letter and in your press release that Adrenalina is now a shareholder of Pacific Sunwear, and that you intend to significantly increase your position. We welcome you as a shareholder, and as with all of our shareholders, we are appreciative of ideas to strengthen our business and enhance our operating results. We do not believe, however, that the interests of other Pacific Sunwear shareholders would be served by a business combination with Adrenalina.”

Overall, you have to hand it to Adrenalina for being persistent. However it doesn’t look like the merger isn’t going to happen, even though PacSun’s Division President did just resign.