By  on March 7, 2007

NEW YORK — Iconix Brand Group Inc. is branching out in more ways than one, from the acquisition of Rocawear to the establishment of a new brand management and licensing company that will make acquisitions.

Iconix said Tuesday that it would acquire the Rocawear brand for $204 million in cash, and contingent payments of an additional $35 million of Iconix stock based on performance thresholds over the next three to five years. The announcement confirmed a report in Monday's WWD that the two were close to inking a deal. The company also reported earnings for the fourth quarter gained 18.3 percent.

Rocawear co-founder Jay-Z will be in charge of all product development, marketing and licensing for the brand, and his senior management team will join Iconix. In addition, Jay-Z will retain his stake in the operating company that manufactures Rocawear men's apparel. His two partners in that business, Alex Bize and Norton Cher, will continue to run the operating company. The company will enter into a long-term license agreement with Iconix for the young men's apparel category. Iconix forecast that Rocawear would generate $43 million in royalty revenue in its first 12 months under the Iconix umbrella.

In the joint venture between Iconix and Shawn Carter, Jay-Z's real name, Iconix will contribute $5 million and Carter's portion will be the equity in a luxury fashion brand called the Shawn Carter Collection, set to make its debut in 2008. The new firm will identify brands to be acquired and/or developed across a broad spectrum of consumer product categories using the Iconix business model.

Neil Cole, chairman and chief executive officer of Iconix, told Wall Street analysts during a conference call on earnings that the investment criteria for the new company would be more along "what Jay-Z can bring to the table and what we think works in the [joint venture that is] different than Iconix's traditional acquisitions."

In a telephone interview, Cole said the joint venture represented a great opportunity to work with Jay-Z. Cole doesn't see Iconix necessarily in competition with itself when viewing possible targets for acquisition since "some deals are more in Jay's world and are not the typical deals Iconix would look at. We're open to all sorts of great opportunities."

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