NEW YORK — Li & Fung USA has acquired Regatta Pacific Alliance for a minimum of $145 million — a move that puts the companies at the forefront of proprietary brand development.
The deal is expected to close by the end of the month. Industry sources in Hong Kong said Li & Fung USA, a subsidiary of Hong Kong-based Li & Fung Ltd., could pay an additional amount in "excess of $100 million" if certain earn-out targets are met. Earn-out agreements in mergers and acquisitions deals typically are over a five-year period, said investment bankers not connected with the Li & Fung and Regatta transaction.
Rick Darling, president of Li & Fung USA, said Haim Dabah will continue to serve as chief executive officer of Regatta, and will also become a member of the Li & Fung USA executive board, as well as Li & Fung's corporate policy committee. In addition, the entire management team at Regatta will continue to run Regatta.
"We've been talking to Haim and his team for 18 months, and we have recognized Regatta as the market leader in the development of proprietary brands," Darling said.
Retailers have been seeking new ways to reach out to their target customer base, and many are searching for proprietary brands to draw consumers into their stores. And while Polo Ralph Lauren Corp. is doing that with American Living in partnership with J.C. Penney Co. Inc., its entry into the proprietary space with its new Global Brands Concept is seen as a validation of the business model.
Regatta has been at the forefront of proprietary brand development. The apparel vendor launched in 1995, but five years ago changed its business model when Dabah realized that the traditional single-brand distribution to multiple retailers was losing traction.
"The proprietary brands business model identifies the white space within the retailers, and we figure out what the product should be [in that space]. Our first brand was Daisy Fuentes, which is hugely successful at Kohl's," said Dabah.
In addition to Fuentes, Regatta also designs and markets Simply Vera Vera Wang, Nicole Miller, Metro 7, Todd Smith and B Street for Charming Shoppes Inc. It is busy working on a new Karl Lagerfeld collection. Dabah declined to provide further details, but sources familiar with the plans said that the line is geared toward department store distribution at contemporary opening price points ranging from $50 to $250.Andy Postal, managing director at MMG, the investment banking firm that represented Li & Fung in the transaction, said, "It's a tremendous opportunity for Li & Fung to be a major contributor in the proprietary brand business, which is the next step in brand development in these major retail corporations today. It's really the best of both worlds because it provides exclusivity of the brand and, at the same time, creates tremendous margin opportunity for the retailer."
The back-end muscle that Li & Fung can provide to Regatta, and Regatta's brand management capabilities, now give Li & Fung the ability to develop its own brands for retailers and be a leader in the proprietary brand business, whether through acquisition or internal development.
"Our goal is to develop a platform for proprietary brands going forward over the next three years with innovative retailers," Darling said.
With the number of brands in the market that are up for sale, particularly those about to leave the Liz Claiborne Inc. and Jones Apparel Group portfolios, could Li & Fung be contemplating a brand acquisition?
"Our business model on brands is that we're very comfortable as a licensee, and not necessarily in owning brands. There are a number of incumbent companies that have built brands that they are divesting, but I don't want to speculate on where [they] might go," Darling said, but he also didn't rule out the possibility that there might be some interest in how some of those brands might be transformed into a proprietary line for retailers.
One manufacturing source familiar with the Liz Claiborne brands being shopped around said there are a few brands that are "household names." And with some tweaking, these brands have the potential to develop into proprietary lines that could fit into the Regatta business model.
In addition to Lagerfeld, Dabah said Regatta is about to launch more lines. He declined to disclose what they are, but said the timing of the transaction is perfect as Regatta can now leverage Li & Fung's financial resources and logistics capabilities. Dabah also believes there is a "window of opportunity" for Regatta to gain share as brands in the market are being shopped, sold and repositioned.Industry sources said the Metro 7, launched in 2005, and Daisy Fuentes lines each have a wholesale volume of $100 million, with Simply Vera expected to become a several-hundred- million-dollar business within the first few seasons.
A source familiar with the Regatta business model said it could take between six to nine months to pull together a brand concept from an idea to a complete lifestyle sample collection, at an investment cost of several million dollars, even before the idea is pitched to a particular retailer.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye