NEW YORK — As an acquisition target, Badgley Mischka may be a jewel in the rough, but it is a jewel with some rough edges.
The designers Mark Badgley and James Mischka acknowledged in an interview on Tuesday that their business was never profitable and was unlikely to become so under its existing structure without a lucrative stable of licenses. And its history of financial losses has been a primary factor in scaring away potential investors, according to people who have been briefed on the company’s books.
Badgley Mischka’s decision to cancel its spring collection and cut 60 percent of its workforce on Monday happened because of the slower-than-expected pursuit of the 16-year-old eveningwear label, the designers said.
While he would not disclose the asking price, Mischka said they had turned away some early bidders because their offers were too low. Yet, any buyer would face the same challenge the designers did when they started the line in 1988, and that which Escada AG has struggled with since buying the company in 1992 — figuring out how to turn the prestige of the runway into a viable business.
“The real decision is how much is needed to invest in the company and how long it will take to get them to that platform where they are profitable and successful,” said Lawrence C. DeParis, president and chief operating officer of Escada (USA) Inc., which said last October it would divest its noncore brands as part of a global restructuring by the parent Escada AG.
DeParis said he was surprised that an appropriate offer had not yet materialized and that the decision was made to cancel the spring collection as a last resort.
“We were staring at the end of the barrel on the calendar,” he said. “Escada has been open to a deal structured in any reasonable way in order for them to move forward.”
DeParis would not specify whether Escada had set an opening threshold for its 80 percent stake in the brand or the identity of those interested parties.
Among the companies that are said to have explored a deal are Birger Christensen, the furrier that signed a license with Badgley Mischka last year through its BC International division; an Italian accessories firm that has worked with the designers on handbags and shoes; the Puig Beauty & Fashion Group, which owns Carolina Herrera, Paco Rabanne and Nina Ricci, as well as institutional funds and private equity companies.
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