The Jones Group Inc.’s hands-across-the-water acquisition of U.K. footwear brand Kurt Geiger strengthens both companies’ global footprints and gives the buyer serious clout in the luxury sector.
Jones closed on the acquisition early Thursday, paying $350 million in cash, inclusive of debt, to U.K.-based private equity firm Graphite Capital and to members of the firm’s management who held minority stakes.
The deal weds two companies already familiar with each other. Geiger, Europe’s largest luxury shoe retailer, has been the distribution partner for Jones’ Nine West brand in the U.K. since 2009.
“Strategically, this enhances our distribution and presence internationally,” said Wes Card, chief executive officer of Jones.
The acquisition, which gives Geiger entree to the U.S. and Jones a platform in Europe, was financed with cash on hand and is accretive to second-quarter earnings. The existing Kurt Geiger management team, led by ceo Neil Clifford, will remain with the business.
Card said the initial plan is to open more Kurt Geiger stores in the U.K., as well as bring the brand to the U.S. through freestanding stores and, through wholesale arrangements, department stores.
Asked about store openings, Clifford said, “I can’t be specific, but we’d be disappointed not to start opening in 2012. We’ve already done quite a lot of thinking, and we’ve got a plan.”
About 75 percent of Kurt Geiger’s business is women’s footwear, with the balance in men’s, a new market for Jones, and licensing.
Card said the deal also fits within Jones’ criteria for acquisitions: “Kurt Geiger has lots of business in the luxury and high-end markets and a phenomenal management team. It was financially compelling as we bought it at an attractive value and adds a sizable business into our company.”
Asked about financial partners versus private equity ones, Clifford told WWD: “It’s been a brilliant journey with private equity, but we instinctively knew it could not continue forever because you’re watching your debt grow, and you’re looking at a sale every few years. And because of that, you end up focusing on the wrong things.”
Markus Golser, senior partner at Graphite Capital, said, “It was the right time to sell, and the right buyer. We see it as a synergistic sale as Kurt Geiger is increasingly pursuing international expansion and Jones will help with that.”
Asked about Graphite’s experience with a high-end fashion brand, Golser said: “I think we caught luxury at the right time. The weakening currency meant that an influx of foreign tourists was able to buy the brand at places like Harrods and Selfridges. It really worked out timing-wise.”
He said going forward, however, it will be difficult for private equity to compete with trade buyers on fashion and luxury deals. “It will be harder for private equity because of the lack of leverage. Trade buyers still pay a premium to have these brands, so it will make competing for them more difficult,” Golser explained.
The purchase significantly strengthens Jones’ presence in high-end footwear and follows its acquisition of Stuart Weitzman last year.
Card said the firm is still in the hunt for acquisitions and won’t limit its next deals to footwear, even though it now has a “powerful group of companies in the footwear industry.”
Rumblings in the market in early May also had Jones looking to sell its profitable jeanswear division, with G-III Apparel Group Ltd. supposedly in close discussions. It’s not the first time buyers have expressed interest in the jeanswear business.
Card declined comment on reports about the jeanswear operation. Neal Nackman, chief financial officer, chief accounting officer and treasurer at G-III, could not be reached at press time for comment.
John McClain, Jones’ cfo, said that after paying for the Kurt Geiger acquisition, “The company has a strong balance sheet, with cash left over. We have an untapped revolver and capacity to raise additional capital if the right deal comes along.”
As of the end of its first quarter on April 2, Jones had cash and cash equivalents of $306.5 million.
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