NEW YORK — Proenza Schouler is ready to take the next step.
After more than a year of negotiations, designers Jack McCollough andLazaro Hernandez have severed most of their ties with Valentino FashionGroup and teamed with a group of 20 investors led by industry veteranAndrew Rosen and financier John Howard, giving their company a financialboost and additional expertise as it seeks to expand.
The newinvestment confirms a report in WWD last September that Rosen was intalks to acquire the brand.
According to a source close to thesituation, the group has invested $10 million to $20 million into thebusiness and assumed debt in exchange for a minority stake equal to thatheld by Proenza Schouler’s management. But very little of the new cashflowing into the business will be going to McCollough and Hernandez, whowere said to have passed up opportunities for a bigger payday in orderto have more control over their destiny.
The new arrangementshould free the designers and chief executive officer Shirley Cook tofocus on the development of their brand. Sources noted this leaves themwith a minority stake in the business, whereas before they were said toown 55 percent of the company.
Valentino Fashion Group, which isowned by private equity firm Permira, paid an estimated $3.7 millionfor a 45 percent stake in Proenza Schouler in 2007 and has retained 5percent of the company.
“We are thankful to VFG for giving us astart, and allowing us to get where we are today,” said McCollough,Hernandez and Cook in a joint statement. “There’s so much we’d like toaccomplish and have found the perfect complement in John and Andrew tohelp us realize our dreams.”
The designers and executives werenot available for further comment, but the statement described the dealas a “recapitalization” of the brand intended to propel the company into“a new phase of development.”
Rosen, is founder and co-ceo ofTheory, and Howard, heads up private equity firm Irving Place Capital asceo, but their stakes in the business represent personal investments.Rosen has similar personal investments in several contemporary brands,namely Alice + Olivia, Gryphon and Rag & Bone.
“When welook at the current state of American fashion, we see the nextgeneration focused in the advanced contemporary space,” said Rosen andHoward in a joint statement. “We believe that the Proenza business isthe future of American luxury, and uniquely poised to compete in aglobal marketplace, which is currently dominated by European designers.In infusing this brand with our resources and experience, we willposition this business to achieve its full potential.”
Sourcesspeculated that as a business, Proenza Schouler was too small forPermira, which counts Hugo Boss as well as Valentino among its brands.It appears that Permira put much of its focus and resources behindValentino and that company’s transition after its namesake founderretired. The parting is said to have been amicable, with all partiesagreeing that it wasn’t the right fit. VFG, however, was keen to keep atleast a small stake in Proenza Schouler, which could be seen as a voteof confidence in the brand’s potential.
With Rosen and Howard,the designers are getting two seasoned backers with plenty of expertisein the fashion industry. Rosen has a proven track record of buildingbusinesses, not just with Theory but also with Theory-owned Helmut Lang,where he has been instrumental in turning the label around and makinginto a top contemporary line. More recently, Rosen flirted with thedesigner segment when he brought in Olivier Theyskens to spearhead thecreative direction of Theory and Theyskens’ Theory. He has been a mentorfor designers at his other investments Rag & Bone, Alice + Oliviaand Gryphon.
Howard has a reputation as a savvy dealmaker andthrough Irving Place, which currently manages $2.7 billion, has investedin Seven For All Mankind, Stuart Weitzman, Aéropostale, New York &Co. and others.
Sources speculated that the new funding wouldbe used to build Proenza Schouler’s assortment in the designer areabefore venturing into new tiers. That could include an increased focuson accessories, retail, e-commerce and potentially a higher profile indenim. Proenza Schouler has already collaborated on jeans with J Brand, adenim company majority owned by an affiliate of Irving Place.
Hernandez and McCollough have been darlings of the New York fashionscene practically since launching the label based on their mothers’maiden names in 2002 at age 23. Their collections have been going fromstrength to strength, and they were able to build a loyal followingamong much-photographed downtown socials like Lauren Santo Domingo andVanessa and Victoria Traina.
In June, the duo won their secondCFDA Womenswear Designer of the Year award. The designers were also thefirst recipients of the CFDA/Vogue Fashion Fund in 2004, among severalother accolades since they established their company.
Morerecently, McCollough and Hernandez have been ramping up theiraccessories business, most notably with their signature PS1 satchel andtheir shoes. They also added a line of small leather goods on theire-commerce site, and have been working on costume jewelry.
Perhaps the biggest indicator of their growing influence is the way inwhich their work is being copied, and the designers have taken an activestand in the fight against knockoffs. In mid-July, Hernandez testifiedbefore the House Judiciary subcommittee on Intellectual Property,Competition and the Internet on behalf of the Council of FashionDesigners of America, outlining how the business has been damaged byknockoffs.
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