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Iconix China Venture Readies Two IPOs

Iconix Brand Group posted a 74.8 percent jump in first quarter net income on a 10.5 percent gain in licensing revenue.

Iconix Brand Group expects two initial public offerings in connection with its Iconix China joint venture this year.

This story first appeared in the May 1, 2014 issue of WWD.  Subscribe Today.

That was disclosed by Neil Cole, chairman, president and chief executive officer of Iconix during the company’s conference call to Wall Street analysts following its posting of first-quarter results.

There is discussion in the markets that one of those businesses is connected with Iconix’s Candie’s operation. The joint-venture partner is Shanghai La Chapelle Fashion Co. Ltd., and sources said the listing will likely be on the Hong Kong bourse.

Because those filings haven’t been made yet, although expected soon, Cole declined to provide any specifics of which joint venture brand business would be filing.

Cole said in a telephone interview that as soon as companies file in China, the filings are made public. The filings would likely be for trading on either the Hong Kong or the Shanghai exchanges. Unlike many of the dot-com businesses that have been seeking to list on an American exchange, Cole said that the Iconix China businesses are “well developed companies that are very profitable.”

The latest filing won’t be the first IPO for Iconix’s China joint venture, which was formed in 2008 with Silas and Veronica Chou. The joint venture had 10 brand partners in its portfolio. The first to go public was China Outfitters Holdings Ltd., a men’s wear retailer that was the London Fog partner in China, in December 2011. The IPO saw private equity firm KKR take a $60 million stake in the offering. Cole said Iconix elected to cash out half its investment in the business and leave half in the public firm.

With seven brand partners in the joint venture portfolio, Cole said the “strategy is to do one or two IPOs a year.” In addition, Iconix owns more than 30 brands and Cole said he is “always looking for new joint-venture partners to grow the business.”

Iconix China also has investments in the Rampage, Badgley Mischka, Royal Velvet, Ed Hardy and Material Girl brands. IPOs aren’t the only path for Iconix China. The venture also sold its interests in the Artful Dodger and Zoo York brands in Greater China to China Outfitters in 2012.

For the first quarter ended March 31, the company posted a 74.8 percent jump in first quarter net income on a 10.5 percent gain in licensing revenue. Net income was $59.8 million, or $1.03 a diluted share, from $34.2 million, or 51 cents, a year ago. Net income was boosted by a noncash gain of $38 million before taxes in connection with the “remeasurement” of the firm’s initial investment in Iconix Latin America due in part to the acquisition of the remaining 50 percent from its joint-venture partner. Licensing and other revenue rose to $116.1 million from $105.1 million.

Cole also said in the telephone interview that the company will continue to look at acquisitions: “I see a lot of amazing opportunities. I’m talking to some best-in-class brands.”