Nordstrom Sells Faconnable to M1 Group for $210M

Nordstrom Inc. has agreed to sell Faconnable for $210 million to the M1 Group, a diversified family-owned company based in Beirut, Lebanon, that's seeking...

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Nordstrom Inc. has agreed to sell Façonnable for $210 million to the M1 Group, a diversified family-owned company based in Beirut, Lebanon, that’s seeking to build a portfolio of luxury and fashion brands.

This story first appeared in the July 26, 2007 issue of WWD.  Subscribe Today.

The $8.7 billion, Seattle-based Nordstrom bought the 57-year-old Faconnable in 2000 for $169 million, but started selling the collection exclusively in its stores in 1989. The brand, which has estimated worldwide sales of about $220 million, has grown into one of Nordstrom’s top-five labels in terms of volume.

“Façonnable has been and continues to be an extremely important brand,” said Mike Koppel, Nordstrom’s chief financial officer, in an exclusive interview with WWD on Wednesday. “But this sale is not about the importance of the brand. It’s more about the fact that when you look at our merchandising objectives, our full-line store growth and our multichannel efforts, operating a business in Europe, which is primarily a wholesale business, is not consistent with our core strategies and where our team should be focused.

“Selling Façonnable is the right thing for our team and for the brand. The new owners are very passionate about Façonnable. They see it as a potentially international brand.”

Façonnable is currently sold in all 98 full-line Nordstrom doors across the U.S., in four U.S. Façonnable stores, 37 others in Europe, as well as in upscale multibrand boutiques, department stores, and franchised boutiques in Europe, the Middle East, Canada and Latin America.

The deal marks M1 Group’s first full-fledged foray into fashion after being immersed in telecoms, airlines, energy, retail and other sectors. The company holds about a 5 percent stake in Burani Designer Holdings in Italy. M1 Group, formed in the early Eighties, has its origins in the construction and telecom sectors, including creating the multinational Investcom mobile telecommunications services, which in 2006 combined with MTN to create the largest provider of mobile services for emerging markets. M1 Group remains one of the largest beneficial shareholders of MTN.

“Our intention is to build a portfolio of brands,” Maher Mikati, executive director of M1 Group, disclosed to WWD. Currently, however, no discussions with other brands are under way. Mikati said he wants to first close the Façonnable deal and get his feet wet running the business before pursuing additional fashion acquisitions. The company is also looking to invest in real estate, travel, oil and other sectors, he noted.

“Nordstrom did a great job with Façonnable, first by introducing the brand in the United States, and then giving it a strong foothold in the States and maintaining its brand equity,” Mikati said. “But Nordstrom wants to focus on their core business — full-line stores.

“There is huge growth opportunity for Façonnable,” Mikati added. “At this point, we would like to strengthen its U.S. presence through a retail rollout.”

He also stressed that Façonnable, which is based in Nice, France, has significant room for growth in Europe, particularly London, Milan and Rome, where the company currently has no stores. After expanding in the U.S. and Europe, “We will then definitely look at Asia and Russia,” Mikati said.

M1 plans to create a Façonnable board of directors and maintain the existing management, at least for the time being. Mikati said Mark Brashear, the chief executive officer, “will be running the show for this point in time. I like Mark a lot. He has a lot of passion for the brand and the employees. We see him as definitely a very good manager going forward.”

Said Brashear: “I think for myself and Façonnable, this is an exciting new chapter. We will develop Façonnable to its full potential. The brand has a broad appeal and a strong heritage that can be leveraged in a number of ways.”

Façonnable, which comes from the word façonner, which means “to create,” was founded by Albert Goldberg in 1961, after he took over his father’s tailor shop in the south of France.

Nordstrom expects the deal to close at the end of August and will continue to purchase the merchandise for at least three years. Upon closing of the deal, M1 will take over the operations, including design, production, licensing, distribution and retailing.

“We believe this transaction is in the best interests of our company, our shareholders, our customers and Façonnable,” Blake Nordstrom, president of Nordstrom, said in a statement. “The Façonnable brand has been very successful for Nordstrom. Over the last 19 years our company has played a pivotal role in the development and success of this unique line, becoming one of our top-selling brands. This move allows Nordstrom to focus on its core business while continuing to offer the Façonnable brand to our customers and allows Façonnable the opportunity to grow independently.”

Façonnable is considered affordable luxury, priced a rung below designer, and is known for its quality, use of Italian fabrics, and a look inspired by the French Riviera lifestyle. The collection ranges from traditional to neo-traditional. Its men’s wear performs better than women’s, and represents a greater percentage of the volume. However, in recent seasons progress has been made on the women’s front with more updated styling.

The target audience ranges roughly from ages 35 to 45.

According to Koppel, it will take a year or so for the new owners “to get their arms around and take control of the business and production.” At that point, Koppel said, determinations on expanding the U.S. distribution will likely be made. In the meantime, Nordstrom will continue to be the sole U.S. distributor. The retailer, through its own design, production and sourcing teams in the U.S., which are separate from those in France, will continue to support the business for roughly 12 to 18 months in a transition service arrangement with M1 Group.

The Façonnable boutiques in the U.S. are in Rockefeller Center in Manhattan, Beverly Hills, The Village at Merrick Park in Coral Gables, Fla., and in South Coast Plaza in Costa Mesa, Calif. A unit in NorthPark Center in Dallas closed in January, 14 months after Nordstrom opened a full-line store in the mall.

U.S.- and Nice-based Façonnable employees will be offered positions by M1. A number of U.S.-based employees will remain with Nordstrom for roughly 12 months to provide the transition services. Nordstrom will be reimbursed for those services and will also realize other standard transaction related costs.

Dresdner Kleinwort Securities LLC, Goldman Sachs & Co. and Lane Powell PC served as advisers to Nordstrom in the transaction. HSBC, LeBoeuf Lamb, Ernst & Young, and Robert Burke Associates served as advisers to M1.

Azmi Mikati, chief executive of M1 Group, said in a statement: “We are delighted to have acquired Façonnable. We believe it is a high-potential brand and we intend to invest in it for the long term to break into new markets and new product lines. Façonnable represents for us the cornerstone in the development of our strategy aimed at investing in luxury products with a big potential for growth.”

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