NEW YORK — Jones Apparel Group Inc. said Thursday it would acquire 55 percent of Stuart Weitzman Holdings LLC, the privately held footwear and accessories firm, strengthening Jones’ position in the upscale footwear market.
Under terms of the agreement, Jones will make initial cash payments of about $180 million to selling shareholders, including private equity firm Irving Place Capital. Stuart Weitzman will be the principal owner of the remaining 45 percent. At the end of 2012, the selling shareholders will receive cash payments for their remaining interest, based upon the value of Weitzman’s business at that time.
Irving Place Capital acquired a 40 percent stake in Weitzman in 2005, and will no longer own any shares.
The Weitzman acquisition is the latest move on Jones’ part to diversify its holdings after acquisitions such as Robert Rodriguez and a licensing deal with Jessica Simpson for a jeanswear line.
Weitzman would sit at the upper end of Jones’ footwear brands, which include Nine West, Bandolino, Easy Spirit, Evan-Picone, Enzo Angiolini, Joan & David, Mootsies Tootsies and Sam & Libby. Among Weitzman’s accounts are Saks Fifth Avenue, Nordstrom, Bloomingdale’s, Neiman Marcus, Jildor, The Shoe Box, Shoe-Inn and Plaza Too.
Weitzman, whose business last year generated about $193 million in net revenues, presently owns and operates 38 stores in the U.S., seven stores internationally, including flagships in Rome and Milan, and has exclusive licenses with 29 retailers to operate Stuart Weitzman stores outside the U.S.
Stuart Weitzman himself, 68, will continue as executive chairman of the company and, together with Wayne Kulkin, president, and their management team, run the business.
Neither Weitzman nor Wesley Card, chief executive officer of Jones, were available for comment Thursday. However, in a statement, Card said, “The Stuart Weitzman business represents an excellent addition to our existing portfolio of branded footwear and accessories and is an ideal complement to our designer and contemporary businesses….Together, with our expertise in execution and sourcing, Stuart Weitzman LLC will continue to expand its reach as a leader in the upscale footwear market.”
Gilbert Harrison, chairman of Financo Inc., who served as financial adviser to Weitzman, said, “We’ve represented Stuart for many years, and I’ve known him 40 years. We were at Wharton together.”
Harrison said he introduced Weitzman several years ago to Irving Place Capital and three years later “Stuart had an opportunity to meet with Wes Card and Andy Cohen (ceo, footwear, accessories and retail at Jones Apparel Group) and got to know the Jones people. I think it’s an extremely good deal for Stuart’s business and will add sophistication to the business and will help him with sourcing and infrastructure. It’s a win-win,” said Harrison.
Weitzman’s father, Seymour, began the business with a shoe factory in Haverhill, Mass., in the late Fifties called Seymour Shoes. Stuart Weitzman started designing shoes for that business in the early Sixties. When Seymour Weitzman died in 1965, Stuart took over the business with his older brother, Warren. They sold it to a Spanish company in 1972, but Stuart bought it back in 1994 and continued to manufacture the footwear in Spain.
The Weitzman acquisition is expected to be accretive to Jones’ earning per share, exclusive of any required purchase accounting adjustments. The deal is expected to close within 30 days. Jones also said Thursday it would begin an offering of $250 million of senior notes due in 2018 but, citing “unfavorable market conditions,” it postponed the offer after the equity markets closed. The proceeds were to be used for general corporate purposes, including the Weitzman acquisition.
Todd Slater, managing director of specialty retail, apparel and footwear analyst at Lazard Capital Markets, wrote in a research note Thursday, “Jones paid 0.9 x trailing revenue (although this number is fully consolidated and does not account for the 45 percent stake it does not own), a good price given Stuart Weitzman’s designer brand status/cachet and strong cash flow as well as very healthy margins that are well above those in JNY’s current wholesale footwear portfolio.” He said the Weitzman footwear line is priced higher than any of Jones’ current brands.
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