Bankrupt Brooks Brothers Finds a Buyer
The retailer is seeking court approval of a $325
million sale to a group backed by the mall owner Simon Property Group and
Authentic Brands Group, a licensing firm.
Sapna
Maheshwari
By Sapna
Maheshwari
Aug. 12,
2020
https://www.nytimes.com/2020/08/12/business/brooks-brothers-sale-authentic-brands.html
Brooks
Brothers, the venerable retailer that was founded in 1818 and filed for
bankruptcy last month, said it would be sold to Simon Property Group, the
biggest mall operator in the United States, and Authentic Brands Group, a
licensing firm.
The $325
million offer for Brooks Brothers, up from a $305 million bid last month from
the same suitors, is subject to court approval this week, the companies said in
a statement late on Tuesday. The buyers committed to continue operating at
least 125 Brooks Brothers retail locations. Before the pandemic, the company
operated 424 retail and outlet stores globally, including 236 in the United
States, according to court documents.
The offer
for Brooks Brothers came from an entity known as the SPARC Group, a joint
venture between Simon Property and Authentic Brands Group. The mall owner and
A.B.G. have teamed up on deals to buy other bankrupt retailers in recent years,
including the teen chain Aéropostale and the fast-fashion behemoth Forever 21.
SPARC has also bid on Lucky Brand, the denim company that filed for bankruptcy
last month. A.B.G. is known for acquiring the intellectual property of brands
like Barneys New York and Sports Illustrated, then licensing their names to
other companies and earning royalties from related products.
The
coronavirus outbreak has toppled several storied retail brands, especially
those focused on apparel, as many stores were forced to temporarily close and
demand for new clothing dropped in a remote, less social environment. Chains
including J.C. Penney, J. Crew, Neiman Marcus and the owner of Ann Taylor and
Loft have filed for bankruptcy protection since May, struggling with lost sales
and heavy debt loads. Most say they plan to re-emerge with fewer stores.
Brooks
Brothers, based in New York, is the oldest apparel brand in continuous
operation in the United States, and has a rare and storied reputation. It has
dressed all but four presidents dating to James Madison, has been worn by Clark
Gable and Andy Warhol and is the official clothier of the Jazz at Lincoln
Center Orchestra. Abraham Lincoln was wearing a Brooks Brothers coat the night
he was assassinated.
It was
revived in the past two decades by the Italian industrialist Claudio Del
Vecchio, who bought it in 2001. The retailer started to slip in recent years,
battered by the rise of more casual workplace attire and the shift to online
retail, prompting a search for new buyers or investors. Brooks Brothers said in
court documents that since April 2019, its business had been marketed to more
than 90 potential investors around the world. The retailer said that its
revenue exceeded $991 million for the fiscal year that ended 2019, with about
one-fifth of that coming from its North America e-commerce business.
The
pandemic dealt a new and unexpected blow to Brooks Brothers, given its pricey,
formal merchandise and reliance on physical retail. Not only were its stores
temporarily closed, but so were the offices of many of its customers. Proms,
weddings, graduations, bar mitzvahs and other special occasions fell off
calendars. On Zoom, sweatpants cannot be distinguished from tailored dress
pants.
The level
of distress at Brooks Brothers came into sharper focus this year when the
company prepared to close its three U.S. factories, in Massachusetts, New York
and North Carolina, forgoing its “Made in America” calling card, and announcing
plans to lay off nearly 700 employees. Like many retailers, it furloughed most
of its staff — it had roughly 4,000 employees before the pandemic — and cut the
salaries of corporate workers. Before filing for bankruptcy, it had already
decided to close 51 Brooks Brothers stores in the United States.
If it is
approved, the acquisition by the SPARC Group will have proceeded remarkably quickly,
given that Brooks Brothers filed for bankruptcy protection on July 8.
On an
earnings call this week, David Simon, the chief executive of Simon Property,
outlined several benefits to the acquisitions of bankrupt retailers through
SPARC, which he referred to as a 50-50 joint venture with A.B.G. He said that
it was acquiring inventory at or below cost, buying any intellectual property
at “attractive values,” cutting the overhead costs of purchased companies and
able to reject certain leases.
He disputed
the notion that Simon Property was “buying into these retailers to pay us
rent,” saying that the company believed in the brands and thought they could
make money. He also noted that the venture was saving jobs at places like
Brooks Brothers.
“That’s
what we should talk about,” he said on the call. “We’re doing our fair share
for trying to keep this world as normal as we can.”
Elaine Yu contributed reporting.
A Day After Their Successful Bid for Brooks Brothers,
ABG and Mall Giant Simon Acquire Lucky Brand
Samantha
McDonald
August 14,
2020, 4:31 PM GMT
Last night,
Authentic Brands Group LLC and mall giant Simon Property Group Inc. — in a
venture known as SPARC Group LLC — announced that they were set to become the
core licensee and operating partner for the denim maker. A judge in the United
States Bankruptcy Court in the District of Delaware on Wednesday approved the
purchase, which was worth $140.1 million in cash and other components.
Through
their partnership, ABG and Simon will oversee all of Lucky Brand’s sourcing,
product design and product development, as well as operate its entire fleet of
brick-and-mortar stores and e-commerce business. The group aims to work with
the brand’s landlords to keep key North America stores — of which it currently
has more than 175 — open. It also seeks to further drive distribution across
e-commerce, department stores and other marketplaces in the region, plus Latin
America, Europe and Asia. (Its wares can be found in chains like Macy’s and
Nordstrom.)
“We are
pleased to welcome this iconic heritage denim brand to ABG,” ABG founder,
chairman and CEO Jamie Salter said in a statement. “Lucky Brand’s DNA resonates
strongly with today’s youth, and we see tremendous opportunity to unlock its
value in key territories around the world. With ABG’s social media expertise
and content development capabilities, we are ready to hit the ground running
and expand quickly into new categories and markets.” (According to Salter, the
acquisition would boost the value of ABG’s portfolio to more than $13 billion
in annual global retail sales.)
Lucky Brand
went bankrupt in early July due to a heavy debt burden caused by recent
challenges stemming from the coronavirus pandemic. At the time, interim CEO
Matthew Kaness said that filing for Chapter 11 protection was the “best course
of action to optimize the operations and secure the brand’s long-term success.”
The court
approval of Lucky Brand’s sale came the same day that ABG and America’s largest
mall owner emerged as the winning bidders in bankrupt Brooks Brothers’
competitive sale process. SPARC had increased its offer to $325 million for the
“vast majority” of the menswear retailer’s global business operations as a
going concern, as well as its intellectual property portfolio. As part of the
agreement, the group plans to preserve the Brooks Brothers brand and continue
operating at least 125 of the chain’s stores.
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