Iconix Brands to be acquired by private equity firm
- The private equity firm Lancer Capital has agreed to purchase Iconix Brands for $ 585 million, including net debt, according to a press release.
- After the transaction, Iconix, owner of the brands Umbro, Starter, Mossimo, London Fog and many other brands, will become a private company. Iconix expects deal to be done before the end of the third quarter of 2021.
- Under the agreement, Lancer would invest $ 60 million in equity. Hedge fund Silver Point Capital is providing debt financing for the acquisition, according to a securities filing.
The past few years have brought both opportunities and challenges for companies operating in the burgeoning brand aggregation industry. With clothing vendors and retailers struggling in the mall doldrums, acquisition goals have been plentiful. But with the acquisitions – often funded by money borrowed from Iconix and peers like Authentic Brands – have come declines in traffic and fierce competition among the retailers who sell their brands.
Iconix has been looking for an answer to its debt for over a year. At last count, Iconix’s long-term debt stood at $518.2 million while first quarter sales remained below Q1 2020 levels. Last year the company’s fortunes fell with much of the apparel like turnover fell by around 27% while the money from the sale of its brands for Umbro and Starter in China helped reduce its losses.
In previous years, Iconix has been hit by large retailers, including Target and Walmart, which have stopped carrying its labels. Target, for example, ditched the Mossimo brand as the mass merchant revamped its own house brands. Yet having a large and broad stable of brands helps isolate Iconix and businesses like it from over-reliance on any brand partners.
Brand aggregation has been a growing business in recent years. New technologies and services have made it easier to manage an online store. Meanwhile, aggregators have kept their books lightly active while pursuing high margin licensing revenues. This means that third parties take on much of the groundwork and risk involved in sourcing and manufacturing products while aggregators act as marketers and custodians of intellectual property.
With a lot of money in the equity and debt markets, some of the biggest players in the market are now considering deals of one kind or another. Genuine brands is would have prepared an initial public offering that would value the company at $ 10 billion. Meanwhile, Sequential Brands – brand owners Jessica Simpson, Joe’s Jeans, And1 and Ellen Tracy – struggles to stabilize her business as she rotates executives and tries to stay in good standing with her lenders. Problems with performance, liquidity and leverage sent another peer, Bluestem Brands, into bankruptcy last year.
While Iconix said its total sale price was nearly 30% above the company’s share price just before the deal was announced, two law firms have announced to Iconix shareholders they are conduct investigations in the business and whether the business leaders sought a sufficiently high business price. Such inquiries are quite common, although they could portend challenges for future shareholders.