NexCen Brands Inc. has tightened its grip on the Bill Blass business it’s trying to sell with the acquisition of Bill Blass Couture, the firm responsible for the ready-to-wear collections presented under the late designer’s name.
This story first appeared in the July 15, 2008 issue of WWD. Subscribe Today.
NexCen acquired the business from Michael Groveman and Carly Andrews Inc. for $425,000 in net liabilities. It agreed to forgive the acquired firm’s obligation to repay about $950,000 lent during the first quarter of this year to support marketing expenses and released Groveman from a three-year non-compete provision dating to NexCen’s acquisition of the Blass brand in February 2007.
Groveman, who along with Tharanco Group chairman Haresh Tharani sold the Blass business to NexCen for $54.6 million in cash and stock, also will be eligible for as much as $25,000 for consulting services given to the Couture unit before the closing.
“Bill Blass continues to be a very important and highly regarded brand in fashion,” said Robert D’Loren, president and chief executive officer of NexCen. “Our acquisition of Bill Blass Couture provides the company with greater control of the future of the overall Bill Blass brand. As we continue to explore strategic alternatives, including the sale of our Bill Blass brand, we believe that owning Bill Blass Couture will maximize the potential sale value of our overall business.”
It wasn’t immediately known whether the inclusion of the rtw component of the Blass business would help clear the way for its sale, although in recent weeks there’s been growing speculation that Iconix Brand Group, a brand management company similar in its model to NexCen, was the leading contender to take over Blass and its home furnishings brand, Waverly.
Neither D’Loren nor Neil Cole, chairman, president and ceo of Iconix, returned calls seeking comment.
Blass women’s rtw is designed by Peter Som, who has been on the NexCen payroll since the acquisition. Michael Bastian is responsible for men’s wear.
NexCen began shopping its two licensed brands in May, after disclosing in that month that there was “substantial doubt” about its ability to proceed as a going concern. Other companies mentioned as suitors have included Tharanco, Windsong Brands LLC and Designer Licensing Holdings, the Blass jeanswear licensee which owns 10 percent of the Blass trademark.
In a Form 8-K filed Monday with the Securities and Exchange Commission, NexCen stated that Groveman informed NexCen that he intended to close the Couture business rather than make additional investments in it.
“The company concluded that owning Bill Blass Couture would be preferable to allowing this business to cease operating or being faced with the prospect of finding a new licensee,” the 8-K said. In addition, the document said that the Couture unit operated at a loss and that NexCen estimates it may have to pump $1.7 million to $1.9 million into it before the end of the year.
Groveman bought the Couture business for undisclosed terms just before NexCen’s acquisition of the Bill Blass brand. It’s operated through a royalty-free license from NexCen since then.
D’Loren established NexCen as a multilayered brand management company and built it through the acquisitions of a series of franchise businesses — including Athlete’s Foot, Shoebox New York and food and restaurant operations — and two well-known consumer products brands, Blass in apparel and Waverly in home furnishings.
However well-received its business model, the company hit a major stumbling block in May, when it revealed that it had failed to report that $30 million of the $70 million it borrowed to acquire Great American Cookie in January needed to be paid by Oct. 17. It then said there was “substantial doubt” about its ability to remain in business and that questions already may have existed when it filed its annual report for 2007.
After the disclosure on May 19, shares of the company dropped 77.1 percent, closing at 58 cents after a $2.53 close the previous day, on volume that was about 48 times heavier than usual.
As plans for the Blass acquisition firmed up last year, NexCen shares rose to $4.26 last Dec. 19 and, following the deal, closed at $5.22 on Dec. 24. Their 52-week high of $11.26 came one year ago.
On Monday, NexCen shares ended the Nasdaq session at 50 cents, down 2 cents or 4.1 percent.
Because $15.5 million, or 28 percent, of the $54.6 million paid for Blass was in stock, Groveman and Tharani have seen their holdings in NexCen dwindle precipitously.