By  on February 3, 2006

NEW YORK — Citizens of Humanity has agreed to a partnership with private equity firm Berk­shire Partners, which now holds a 66 percent majority ownership in the premium denim company. The investment was valued at $250 million to $300 million, market sources said.

Boston-based Berkshire sees continued growth in the high-end denim business even as some on Wall Street forecast that it is topping out.

"We view the premium denim segment as $1 billion out of the $12 billion denim market, with the upscale denim business growing very rapidly....There are currently a number of players in the premium denim space and there will likely be some consolidation going forward," said Larry Hamelsky, managing director of Berkshire Partners. "The winners will command greater share of the premium denim market, and Citizens is one of the winners."

Opportunities for the company include growth in U.S. and international distribution of the women's line, as well as the men's line newly launched in July, Hamelsky said. In addition, he noted the possibilities in extending the brand outside of the denim categories.

Jerome Dahan, chief executive officer of Citizens, which is based in Huntington Park, Calif., will continue in his role. He holds the remaining one-third share in the company, which he founded in 2003. Dahan, who was once the head designer at Lucky Brands, was also a co-founder and the original designer for Seven For All Mankind, now owned by Bear Stearns Merchant Banking.

The companies did not disclose terms of the transaction.

Market industry sources said that Citizens last year posted a profit in the range of $35 million on sales of about $80 million. The brand is sold in high-end department stores such as Barneys New York and Neiman Marcus, as well as specialty shops like Scoop and Aritzia.

"I'm thinking about a flagship store for the brand in Los Angeles, but it will be a [different kind of] retail concept," Dahan said. "When your company grows, you want exposure in a certain way."

Marc Cooper, investment banker at Peter J. Solomon, which represented Citizens, said that Citizens is a strong growth company because of Dahan, whom he described as a "design genius who sets the trends. He doesn't jump on the trend and take advantage of it, he is the inventor of trends."

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