By  on February 9, 2006

NEW YORK — With its sights set on becoming a "global lifestyle brand," Steven Madden Ltd. acquired an accessories manufacturer it began working with last year to develop handbags.

Steven Madden purchased privately held handbag and belt designer/manufacturer Daniel M. Friedman & Associates for $18 million in cash in an effort to complement and widen its reach beyond its core footwear business.

The transaction, which makes Daniel K. Friedman & Associates a wholly owned subsidiary of Steven Madden effective immediately, is expected to contribute 15 cents to 18 cents a share to earnings in the first full year of ownership, Long Island City, N.Y.-based Steven Madden said Wednesday.

"We've made so much money in the shoes business, it's only a natural for us to do this," said creative director Steve Madden in an interview with WWD. "It's such an easy first cousin. It should be something we can do already. The reaction from the merchandise managers has been terrific."

New York-based Daniel M. Friedman & Associates was founded in 1995 as a manufacturer and distributor of brand-name fashion handbags and accessories. The company, which had sales of $41 million in fiscal 2005, holds accessory licenses for Betsey Johnson, Union Bay and Ellen Tracy and develops a private label belt line under the brand Fina Firenze. Daniel M. Friedman & Associates also launched handbag and small leather goods for Jennifer Lopez's JLo label in early 2004.

Under the terms of the agreement, Daniel M. Friedman & Associates, which has produced belts for Madden for about six years, will retain its existing business model, current licenses and offices here while developing handbags and belts for Steven Madden.

In July, Steven Madden first signed a licensing agreement with Daniel M. Friedman for handbags and other accessories. The handbags, which incorporate several different sizes and fabrics, such as metallic, are shipping and will be available at all 99 Steve Madden boutiques as well as 300 department store doors in March. The new line of handbags, however, currently is being tested at three Steve Madden stores, including one in Santa Monica, Calif., where one-third of the bags sold in 10 days, according to Madden.Madden himself will head up the Steven Madden/Daniel M. Friedman & Associates design team. Madden said he's eager to begin working closely with — and learning from — the Daniel Friedman designers. They've "done such an unbelievable job with Betsey Johnson's bags and some of the other licenses they have," Madden said. "We're just real exited about being involved with them."

In fact, Madden hasn't wasted any time in getting to work. He said Wednesday that he started making a handbag sample out of a patent leather fabric that's been a hot seller in the company's shoes. "I'm trying to bring that whole swiftness of delivery to the handbags," he explained.

With $55.7 million in cash in its coffers as of Sept. 30, the last period for which financial data is available, Steven Madden is certainly well prepared to expand its brand. The company said Wednesday that international growth is a priority. It already has a presence in both department stores and stand-alone stores in 10 to 15 countries, including England, Mexico and Canada as well as countries in Central and South America. The company also is ramping up to open stand-alone Steve Madden stores in China.

"It's our plan to become a global lifestyle brand and in that regard, the [Daniel M. Friedman] transaction broadens our platform and allows us the ability to be seamless to the customer," said Jamieson Karson, chairman and chief executive officer of Steven Madden.

Madden also mentioned the prospects of eventually opening accessories-only stores, venturing into denim, travel bags and men's accessories and working with the Daniel M. Friedman designers to create small leather goods and CD and cosmetic cases, as previously reported. That's in addition to the Steve Madden-branded outerwear, hosiery and eyewear that are already available via other licenses.

"Everything is open. Right now ... everything is on the table," said Madden, who emphasized, however, that the company takes a conservative approach to growth.

At present, though, the firm is focused on making the most of its new acquisition. "We want to make the best bags we can for Steve Madden for the next six months and keep Betsey [Johnson handbags] as hot as they've been," Madden said. "We're very proud of what [Daniel M. Friedman] has done. We've bought the business for the business. To me, the Betsey Johnson business is the hottest bag line in the U.S., and we plan on continuing to nurture that business."

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