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Hudson Jeans, or at least a piece of it, is on the block.
Fireman Capital Partners and Webster Capital have put their stakes in the premium denim brand up for sale, which could lead to a complete sale of the company.
Investment bankers said a deal is likely to depend on what Peter Kim, chief executive officer and founder, wants to do with the brand. According to financial sources, Kim sold a minority stake to the two private equity firms in 2009 for $33 million.
Kim could not be reached for comment, and calls to Fireman and Webster were not returned by press time.
Fireman is said to be eager to unload its investment in Hudson Jeans, which represented its first significant apparel investment as an equity fund.
Financial and market sources said the brand was doing roughly $50 million in annual sales when the private equity firms took their stake, and since then, due to heavy marketing of the brand, volume for 2011 is projected to be in the $70 million range.
Shortly after the investment stake by Fireman and Webster, Kim projected sales could grow 10 to 25 percent in 2009 from the $50 million sales volume in 2008. That projection included a new campaign by advertising executive David Lipman, who also is an investor in Fireman Capital.
Sources expect that a sale of the firm, if it happens, would likely be for around $75 million to no more than $100 million, given current volume and sales growth projections. Growth is expected to be 25 percent over the next few years.
Founded in 2002, Hudson has a following among Hollywood’s celebrities, such as Rachel Bilson, Jessica Alba, Sienna Miller, Angelina Jolie and David Beckham. Athletes who favor the brand include Derek Jeter and Mark Sanchez. The Duchess of Cambridge, formerly known as Kate Middleton, is also a fan.
Its recent marketing campaigns featured Patrick Schwarzenegger, the son of former California governor Arnold Schwarzenegger and Maria Shriver, and Georgia May Jagger, daughter of Mick Jagger and Jerry Hall. Both were done under the creative direction of Lipman. Industry executives said it was Jagger’s fronting of an ad campaign for Hudson Jeans in fall 2009 that helped raise the brand’s profile internationally.
Investment bankers believe that Hudson Jeans will be acquired by a strategic buyer, rather than another private equity player. Sources said there are supposedly four or five strategic firms that have had discussions regarding the brand.
Some firms that have been mentioned as potential buyers include VF Corp., Kellwood Co. and G-III Apparel Group Ltd.
A spokeswoman for VF declined comment. VF, which owns Seven For All Mankind, is not believed to be a top contender, though. One source said the megagroup, which, on Sept. 13, completed its purchase of Timberland for $2.3 billion, is more likely to be eyeing acquisitions where annual volume is closer to the $1 billion range. Moreover, the company has said it is focusing its acquisition activity on lifestyle brands in the outdoor and action sports categories rather than in denim.
Kellwood executives could not be reached for comment. Kellwood has been on the acquisition trail, buying in recent years Adam, Rebecca Taylor and Zobha. While it is keen on an acquisition in the premium denim market, it is also looking at opportunities in other categories, said someone familiar with the firm’s acquisition strategy.
Executives at G-III did not return calls for comment by press time. G-III has said repeatedly it is on the lookout for more brands. It had taken a look at the jeanswear business belonging to The Jones Group, which is now the subject of negotiations with Delta Galil. Just how serious G-III might be is unclear, however. One investment banker said G-III tends to take at least one look at all opportunities that are available.