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Ten million dollars, cash.
This story first appeared in the December 30, 2008 issue of WWD. Subscribe Today.
That was the relatively small sum paid to NexCen Brands Inc. for Bill Blass, one of American fashion’s most venerable names, signaling how far the brand has fallen since its heyday under its legendary founder. The buyer, Peacock International Holdings LLC, beat out a number of other bidders and plans initially to push the brand even further into the mainstream.
The new owner hinted, however, that it could one day fund a return to the runway for Blass — if, that is, it can find a designer who can adequately interpret the brand, which none of its previous owners have been able to do over the last decade.
Peacock’s owners, brothers Peter and Cin Kim of South Korea, have acquired a designer name with worldwide recognition, but one now functioning without its historic connection to the fashion market.
Gone are Michael Bastian, creative designer for men’s wear, and any existing staff for Blass. Craig Hoffman, president of Blass, is back at NexCen as managing director, where he was prior to assuming the presidency at the fashion firm. Peter Som departed as creative director with responsibility for the women’s collection two months ago, and the Bill Blass Couture unit, responsible for the ready-to-wear business and runway shows, was closed just before Christmas and its more than 60 employees were let go.
Peacock purchased the worldwide rights to the Blass trademark and the Blass licenses already signed. Its Peacock Apparel Group operation is a men’s dress shirts and neckwear specialist owned by Cin Kim. The deal closed Wednesday.
Investors delighted in the news and word of NexCen’s amended credit facility, pushing shares up 100.5 percent to close at 15 cents, although that remained a fraction of their 52-week high of $5.25.
According to Allan Ellinger of MMG, Peacock’s financial adviser, the brothers had been prepared to pay nearly three times the purchase price had initial projections and expectations for the brand panned out.
“Peacock saw Blass as a world-class brand and platform to expand in additional men’s, women’s and home categories both here and abroad,” said Ellinger.
NexCen at one time had hoped to pull in more than $25 million for the sale of the legendary brand, which enjoyed strong roots in both women’s and men’s wear, but the company’s financial difficulties and the acquisition freeze brought on by the credit crunch made that target all but impossible to attain.
NexCen paid $54.6 million in cash and stock for the brand in December 2006 and tacked on another $425,000, plus another $950,000 in loan forgiveness, when it acquired Bill Blass Couture, the rtw unit responsible for runway shows, from Michael Groveman and Carly Andrews Inc. in July.
With a new parent, the designer brand might even return to the runway within a year, according to Scott Patti, executive vice president of sales and licensing at Peacock. He noted that a move back into rtw would require the hiring of someone with Blass’ design sensibilities. Although the firm has some candidates for such a move in mind, it hasn’t made any overtures to potential designers yet.
Even if such an offer were made and accepted, it would take at least another six months before a renewed rtw effort could be launched, sources said.
Still, Patti acknowledged the recognition factor that a brand can garner from runway shows.
For now, rtw will have to wait in line until after Peacock can assess and ramp up certain categories for the licensing business here and abroad. Peacock hopes to reach the overseas markets within a year.
“We’re a licensing company,” Patti told WWD, adding that, with ownership of such a major trademark, the acquisition was viewed “as a way to control our own destiny.”
He described life as a licensee, rather than licensor, as fraught with unknowns. “You can build volume, and then have the license pulled from you,” he said.
Patti himself was enamored of the Blass brand, having spent four years as president of Mallory & Church, which held the Blass neckwear license, before joining Peacock in his current position two years ago.
Peacock sells to many department stores and specialty chains, most situated in the midtier market. Its current licenses include Colours by Alexander Julian, Chereskin, Haggar, Harvé Benard by Benard Holtzman and Giorgio Brutini Collezione. It also produces under store labels and its own brand portfolio, which includes Peacock and Bergamo New York.
According to Patti, Peacock expects to utilize its sourcing and design expertise to work with overseas partners in the management of the Blass brand. In addition to three offices in South Korea and one in New York, Peacock has operations in China, Vietnam and Bangladesh.
Negotiations between NexCen and Peacock began about 18 months ago, when the buyer approached the seller about becoming the Blass licensee for men’s dress shirts and neckwear.
“NexCen wanted to go high end for men’s, and we’re not known for the high end so we got discouraged,” Patti said.
Still, Peacock became more convinced that Blass was still a premier brand worth owning. The firm began active pursuit of ownership of the Blass trademark in June after financial troubles surfaced at NexCen in May. Although the sale process slowed somewhat over the summer as NexCen wanted to first focus on completing the sale of home furnishings brand Waverly, which ultimately was sold to Iconix Brand Group, talks resumed in late August.
Sources with familiarity of the negotiations said one of the early bids by Peacock, after resumption of the sale process, was slightly above the $25 million range. But then in September came the convulsions in the stock and credit markets, the paucity of sales at the couture unit as retailers pulled back because of uncertainty about the brand’s ownership and continued reports that Som would be leaving.
The cash component on Peacock’s end proved critical. Sources said NexCen needed to make a deal happen by the end of the year because of continuing pressures on its finances and that Peacock held a distinct advantage because it could orchestrate an all-cash deal without any outside financing.
Time clearly worked against NexCen’s hopes of recouping more of its investment in Blass than it ultimately did. However, Peacock did have a competitor in its bid for the brand. Market sources said the rival bidder was Arnold Simon, the holder of the Blass denim license for men and women.
Simon on Monday said, “We had put together a group to try and buy the brand.” For now he is waiting to hear from Peacock. Patti said he would be reaching out to licensees this week.
According to Ellinger, Peacock likely will want to fully digest the Blass acquisition before it considers any further possible expansion of its brand portfolio.
“They will want to market Blass successfully and reposition it while they develop a cohesive brand-positioning program and licensing structure to support it,” Ellinger said, adding that Peacock, throughout the bidding process, “was one company that had every intention to make it to the finish line from Day One.”
Still, some took the likely move of Blass down-market — and the amount paid — as a disquieting sign. The Blass name has been synonymous with American designer fashion for five decades.
“This is a classic example of an iconic brand that could not withstand the death of its namesake,” said Donald Dolce, senior vice president of Allyn Saint George Licensing & Marketing Co. “If you look at other brands like Chanel, they survived and did well. They were very smart. After several false starts, they hired Karl Lagerfeld.”
It wasn’t that those hired following Blass’ 1999 retirement — Steven Slowik, Lars Nilsson, Michael Vollbracht and Som — weren’t talented, but just not on the level of talent and charisma of Blass. “Keeping the momentum of a fashion brand going isn’t an easy proposition,” Dolce noted. “You don’t only need talent but also financial backing.”
While Blass, who died in 2002, was revered for his style, he wasn’t averse to venturing out into more widely distributed products, such as men’s shirts and ties, as well as nonfashion commercial opportunities, lending his name to a line of chocolates and even a designer edition of the Lincoln Continental. He drew the line, however, at major appliances.
Perhaps more than any individual in the first wave of American “name” designers, his impact resonated in both the women’s and men’s wear worlds. In 1968, he received the first men’s wear Coty Award, and his classic approach to fashion formed the basis for a wide-ranging men’s business, overseen by tailored clothing licensee Pincus Bros. Maxwell.
Blass’ acquisition by NexCen was preceded by the 1999 sale of the company, Bill Blass Ltd., to Haresh Tharani, chairman of what was then the company’s largest licensee, and Groveman, then chief financial officer of Bill Blass Ltd. CAK Universal Credit Corp., cofounded by Robert D’Loren, funded the takeover, believed to be worth about $50 million, with what was the first use in the apparel industry of investment-grade asset-based securities supported by the Blass trademark, brand equity and future licensing revenues.
D’Loren, who also was involved in financing deals involving Oscar de la Renta and Badgley Mischka, went on to form NexCen and had built up a sizeable portfolio of licensed and franchised brands — mainly in the fast food area — before last May, when NexCen informed a disturbed investment community that there was “substantial doubt” about its viability as a business. The company had failed to disclose that $30 million borrowed to acquire Great American Cookie, one of its franchised brands, needed to be paid down. NexCen’s stock lost more than three-quarters of its value on that news and has continued to retreat despite the sale of its Waverly home brand and numerous loan extensions.
D’Loren departed in August and was succeeded as chief executive officer by Kenneth Hall.
In conjunction with the sale of Blass, NexCen entered into an amendment to its existing credit facility with its lender, BTMU Capital Corp. The remaining balance of $14.2 million on the note that was related to the Blass licensing business was converted into a “deficiency note” bearing interest at 15 percent a year, NexCen said.
The amendment extends the note’s maturity date by three years until July 31, 2013, and defers its scheduled principal payment obligations until its maturity date.