The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Private Equity in Fashion and Lifestyle | NYTIMES.COM

When earlier last week, Phillips Van Heusen that owns iconic brands worldwide including ck, Van Heusen and IZOD and US brands that it licences like Geoffery Beene  bought over like sized Tommy Hilfiger, it rid PE player APAX partners of its interest for a deal worth $3 billion and added $2.25 billion in its similar 2009 topline. This $4.5 billion revenue Giant in Fashion and retailing leads an industry that has grown by leaps and bounds in the USA in the last one year. When PE entered Luxury brands back in 2007, it faced significant challenges, including its first deals with Valentino in Italy where they bid adieu to the brand label owner soon after the deal.

The Tommy deal leaves with APAX the designer Karl Lagenfeld, not sold as part of the deal but already signed with Tod’s Hogan for a line of shoes from Lagenfeld. Lagenfeld would again be spruced up in the next couple of years for an eventual sale.

PVH owns brands like Calvin Klein Collection, ck Calvin Klein, Calvin Klein, Van Heusen, IZOD, ARROW, G.H. Bass & Co., Bass, City of London, Bugatti and Eagle, and its licensed brands, Geoffrey Beene, BCBG Max Azria, BCBG Attitude, CHAPS, Sean John, Donald J. Trump Signature Collection, JOE Joseph Abboud, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors, Michael Kors Collection, DKNY, Tommy Hilfiger, Nautica, Ted Baker, Ike Behar, Valentino, Hart Schaffner Marx, Gianfranco Ruffini, Studio by Fumagalli’s, Zylos by George Machado, Jones New York and Timberland, as well as various private label brands.

Meanwhile Phillips Van Heusen is moving into China with 155 new stores from IZOD.

However, not all PE players are as value accretive. EMI is well on its way to give Citigroup another opening in PE (after the $9b sale of its existing PE business) EMI is unable to pay up on a huge loan and top up with the bank and s looking for a way to exit without becoming a part of Citi. Not to play a spoilsport on the image games and to use an example from outside Fashion, Man United of UK and WIND Hellas of Greece(Telecom) were purchased in 2007 for $500m with virtually no debt and both company’s own significantly higher debt today, the baggae going up 4 times in 2 years of PE ownership, stifling cash flow and eventual operations.

Hilfiger was sold by APAX for a 100% gain over its acquisition price of $1.6 bn in 2006, and Lagerfeld would be the cherry on the ice. Meanwhile, Banks have stepped forward well in time for Bharti to announce Financial Closure for its proposed deal for Zain Telecom’s Africa assets. PE seems to have known for a long time that the Lifestyle sector value would be in play and its interests in the industry are going to be profitable despite the millions invested by PE partners in their retail and fashion investments during 2007 and post crisis for that elusive exit. Some not so clean operators’ may also do quasi deals in the period around structural constructs like regulations, new geographies but players like KKR Oakhill and APAX along with new deals by players like UBS iwith Bijing to bring PE to the local consumption boom is but a start of a value accretive chain. Citi has earlier announced a PE venture exclusivey for Chinese shopping malls. Closer home in India, some of the PE investment may go to real estate or Holiday leaning ventures (KKR _ Cafe Coffee Day) but a lot is hanging on changing regulations to kick off the boom.

The last completed Deal in the retail lifestyle segment was when Oaktree received $600 million in equity for its $1418 mn investment in Duane Reed from Walgreens. Private Label Brands come more to mind but they might still not reflect most of the Lifestyle boom if the retail chains are neglected in a only apparels analysis.

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This entry was posted on March 22, 2010 by in O'nomics, Private Equity, Real estate, Retail Lifestyle, US and tagged , , , , , , , , , .

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