Li & Fung Ltd. appears poised to gain a foothold in footwear.
Financial sources said Wednesday that LF USA, the U.S. subsidiary of the Hong Kong-based firm, is nearing a deal to acquire footwear firm Jimlar Corp., a $450 million privately held firm that owns the Frye trademark and does business through licenses such as Coach and Calvin Klein. An agreement might not be completed until Li & Fung reports earnings next month, since it is in a "quiet period" under applicable securities law. But sources said it also could come sooner.
Talks have been under way for several weeks and Jimlar’s management likely would stay on as employees of LF USA. L&F’s transactions typically involve earn-out agreements that are structured over a five-year period.
Jimlar, based in Great Neck, N.Y., would be moved under the LF USA umbrella, probably as part of its Fashion Accessories Group operation. Terms of the transaction were not immediately available.
A spokeswoman for New York-based LF USA said, "The company does not comment on rumors or speculation." Jimlar didn’t respond to requests for comment.
Li & Fung has been on a buying binge, and last week disclosed three acquisitions involving an initial cash outlay of $140 million for several licensing deals, including a relationship with Sean John for men's sportswear.
More deals are said to be in the pipeline, including one that would bring together Sears Holdings Corp. and LF USA's new Music Entertainment Sports Holdings unit in what would be the first of a series of brand launches. A Sears spokesman declined comment, but such a move would be consistent with Sears’ recent push under John Goodman, executive vice president of apparel and home, to upgrade its apparel business through the use of exclusive brands. The Hoffman Estates, Ill.-based retailer this week sealed an agreement to become the exclusive retailer for junior brand Bongo, which is owned by Iconix Brand Group Inc.
LF USA holds majority ownership in MESH, and is partners with Star Branding. The joint venture will focus on creating two to five lifestyle brands a year inspired by trends in music, entertainment and sports. Star’s partners include Tommy and Andy Hilfiger, Bernt Ullman and Joe Lamastra.
Rick Darling, president of LF USA, told WWD last week that the first launch for MESH will be a rock-inspired denim brand for men and women that will come in the next 60 days.
Another potential deal is said to involve an acquisition, possibly in accessories. LF USA said last week that it purchased the bulk of the assets of Cipriani Accessories Inc. and its affiliate The Max Leather Group. Cipriani, a small leather goods and cold-weather accessories business, will be part of the fashion accessories operation, which already houses Kathy Van Zeeland and Rosetti handbags. At the time, Darling said the thinking behind Fashion Accessories Group is for it to be the "one-stop shop concept."
There is also speculation there could be either a licensing deal or an initiative in the health and beauty category. Li & Fung for the past two years has been eyeing firms in the accessories, footwear and health and beauty worlds, areas where it has not had a major presence globally.
The company made an initial foray into health and beauty when it said last week that it acquired Jackel Group, a Hong Kong-based firm that is a player in the beauty and packaging industries. Its customer base includes Coty, Elizabeth Arden, L'Oréal and LVMH Moët Hennessy Louis Vuitton.
Jimlar was founded in 1956 by Victor and Madeleine Tarica. Their sons, Jim and Larry, serve as the firm’s chairman and president, respectively.
Li & Fung makes two primary types of acquisitions — those that strengthen its sourcing operations and others that are considered strategic purchases. It has completed more than 40 sourcing-directed deals around the world in the last 10 years, according to a source close to the firm. In addition, Li & Fung has bought 15 companies in the U.S. in the last five years, all under the LF USA portfolio, with Cipriani its 16th purchase, the source said.
Market and financial sources cite Darling as the brainchild behind the growth in the U.S. In 2004, he developed a plan that expanded the company's business presence with retailers in the U.S. Sources said LF USA's licensing revenues alone are more than $1 billion annually.
Li & Fung posted a 39 percent increase in profit to $434.6 million on total revenues of $13.48 billion for the year ended Dec. 31, compared with profits of $311.1 million on sales of $14.22 billion in 2008. Currency conversions were made at average exchange rates for the respective periods. Li & Fung’s U.S. and European operations contribute about 30 percent to the parent firm's total revenues.
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