WWD.com/business-news/financial/hong-kongs-it-buys-90-of-bape-parent-co-3456217/
government-trade
government-trade

I.T Buys A Bathing Ape’s Parent Company

The Hong Kong-based retailer has paid $2.8 million for the stake in Nowhere Co.

Nigo
Appeared In
Special Issue
WWDStyle issue 02/02/2011

TOKYO — Hong Kong-based retailer I.T Ltd. said Tuesday it has agreed to buy 90 percent of Nowhere Co., the corporate parent of Japanese street label A Bathing Ape, for 230 million Japanese yen, or $2.8 million at current exchange rates.

This story first appeared in the February 2, 2011 issue of WWD.  Subscribe Today.

I.T said it plans to restructure the money-losing company and restore it to profitability. The luxury goods and fashion retailer said it wants to broaden the geographic reach of the brand, known as Bape, beyond its core Japanese market.

The retailer said that Nowhere founder Tomoaki Nagao, who goes by the name Nigo, will serve as a creative director of Nowhere for an “initial period of two years” and will oversee product design, brand direction and image development in that role. An I.T spokesman said Nigo’s contract would be considered for renewal at the end of the two-year period.

Music and fashion impresario Nigo, who has gold-capped teeth and favors knit caps year-round, founded Nowhere in 1993. Over the years, the label has developed a cultlike following as fans snatched up its colorful sneakers, camouflaged clothing and simian-themed T-shirts. It has also diversified into children’s items through a licensing deal with Sanrio and tailored men’s apparel.

But the hype surrounding Bape has not translated into profits — at least not recently. I.T said Nowhere booked a loss of 267.43 million yen for the fiscal year ended Aug. 31, 2009, and a loss of 119.05 million yen for the year ending Aug. 31, 2010. At average exchange rates for their respective periods, that comes to a 2009 loss of $2.78 million and a 2010 loss of $1.32 million.

I.T said Nowhere’s net liabilities as of Aug. 31 were 1.25 billion yen, or $13.88 million.

The Hong Kong retailer is buying the shares from Nigo and from minority investor Springlane Global Investment Ltd. Nigo, who is selling his entire stake in Nowhere of 63.24 percent, is receiving $1.46 million.

It’s not yet clear how the acquisition will affect Nigo’s partnership with singer-producer Pharrell Williams in the Billionaire Boys Club and Ice Cream brands. An I.T spokesman said a final decision had not been made, but it’s likely Nigo will continue to be involved with both labels.

The deal is the latest example of how the purchasing power in the fashion M&A game is shifting to Asia. Li & Fung, for one, is embarking on a shopping spree. Most recently, its subsidiaries have snapped up Cerruti and Beyoncé Knowles’ fashion vehicle Beyond Productions in deals just weeks apart. Meanwhile, cash-rich Fast Retailing has also said it’s in the market for acquisitions if it finds a suitable target.

Sham Kar Wai, I.T chairman and chief executive officer, said the Nowhere acquisition will help the retailer become more global.

“We believe that this acquisition will broaden the brand portfolio of our group and increase our market share in the streetwear fashion in Greater China. It will also help position us better in tapping into the international market,” he said in a statement released via the Hong Kong Stock Exchange.

Sham is traveling in China and could not be reached for further comment, according to his spokesman. Nigo could not be reached for comment as of press time.

The Hong Kong retailer said it plans to “restore Nowhere’s healthy balance sheet and positive cash flow” by cutting costs, shortening the production lead time and strengthening the brand’s global retail network.

Nigo said early last year that he was open to the idea of selling a stake in his company. He made that statement when Nowhere inked a licensing deal with Sanrio to develop its Baby Milo character for children’s items.

I.T is Bape’s distributor for Greater China, and the two parties first joined forces in 2006 to open a store in Hong Kong. Most recently, I.T dedicated the lower level of its new I.T Beijing Market store, developed in tandem with Comme des Garçons, to a Bape boutique. Nigo traveled to Beijing in late December to attend the store’s opening party and sign autographs. A couple months earlier, the partners opened Bape’s first Mainland China store in Shanghai.

Bape also has stores in New York and London, as well as sales points at Colette in Paris and 10 Corso Como in Seoul.

I.T said it first reached a nonbinding agreement with Nigo last July. The company subsequently agreed to purchase 27.03 percent from Springlane Global Investment Ltd., which is incorporated in the British Virgin Islands. Those two deals give I.T about 90.27 percent of Nowhere.

The remaining 10 percent of the company will be held by a couple of “founding shareholders” who are willing to stay on as minority investors, the spokesman explained, without naming them.

I.T’s brand portfolio includes Balenciaga, Cheap Monday, Dior Homme, Thom Browne, Givenchy, Yves Saint Laurent and numerous others. It has a network of 357 directly controlled stores and 70 stores operated through franchise agreements. Most of the network is located in Hong Kong and Mainland China, although it has a small presence in Thailand and a smattering of other countries.

The Hong Kong company’s net profit for the six months ended Aug. 31 more than doubled to 107.9 million Hong Kong dollars, or $13.88 million at average exchange rates, for the period, while sales rose 20.8 percent to 1.5 billion Hong Kong dollars, or $192.95 million.