NEW YORK — Hip-hop may be the next frontier for TKO Apparel, the $200 million Miami-based private label manufacturer of women’s and men’s pants for brands such as Levi’s, Wrangler, Calvin Klein, Perry Ellis and Izod.
James Tate, president and co-owner of TKO with his brother, Kenneth, said the pair were close to a deal with a “$126 million hip-hop-inspired clothing company” that he declined to identify. Executives familiar with both companies speculated that the firm is Rocawear, part of Damon Dash’s fashion and entertainment conglomerate, The Roc, a $500 million company encompassing brands in fashion and entertainment.
Industry analysts estimate that Rocawear brings in $125 million a year in wholesale volume. A Rocawear competitor, Phat Fashions, was purchased by Kellwood Co. last year. Among other rivals, Marc Ecko Enterprises is looking to buy its own multimillion-dollar brand, and Sean John already has major backing from Ron Burkle.Tate said that, should a deal happen at all, it would close within the next few months.
Ronnie DeMichael, Rocawear’s chief operating officer and chief financial officer, told WWD that the company is not for sale.
Such a purchase would bring TKO into a new realm of business. The company last month entered into an agreement with Candie’s Inc. to buy Unzipped Apparel, which manufactures Bongo jeanswear. The sale gives TKO the exclusive manufacturing and distribution rights to Bongo jeans, and is intended to bring TKO a significant amount of business. Bongo generates revenue of about $150 million annually, with $80 million of that coming from jeanswear.
“This deal with Candie’s was such an easy one,” Tate said. “We met with Neil [Cole, ceo of Candie’s] at the company and just clicked. Now we plan to really use our resources to pump the business up.”
Tate said that, while he doesn’t think there is anything wrong with the way Bongo is run, it is getting a needed jolt in its merchandise design.
“We’ve just brought in Steven Jolna to design Bongo in Los Angeles,’’ Tate said. “He knows so much about the denim business, so he’s been just great for the brand so far. The thing that we love about the Bongo brand is that it is a great-quality product that the customer can buy at a great low price. We plan to keep that exactly the way it is. We are just looking to round off the brand with a new creativity added in.”Jolna, a brother of Kerry Jolna, who runs the Los Angeles-based Jolna Design Group, brings expertise from high-end denim brands such as Bella Dahl and Bartack. Tate said he plans to launch a young men’s Bongo line soon.
Until a few months ago, amid speculation that TKO was on the acquisition trail, the company kept a low profile. Tate said he never thought he would take such an interest in the fashion business.
“When we started the company, we saw it as another business opportunity, even though we didn’t really like the fashion industry,’’ he said. “Now, I think it’s the most exciting business I’m a part of. When I come to New York to meet with people in this industry, I get this rush of energy that I cannot explain. It’s so creative.’’
Tate has come a long way since working at construction sites in 1980. In addition to his stint as an owner of Century 21 real estate (he left in 1993), Tate and his brother have been business partners in several industries, with fashion being a small piece of their empire. The Tates have owned and operated their own billboard company and contracting businesses.
In addition to TKO Apparel,which they started in 1996, the brothers own and operate Miami-based Tate Realty Inc., a real estate brokerage, and Tate Development Corp., which develops, manages and owns shopping centers, office buildings, golf courses and apartment complexes, among other buildings, nationwide.
Tate said his experience in other businesses has been useful in fashion. For example, with his building development company, he needs to come up with a disciplined game plan for developing a new building. If that guideline is revamped even slightly, the entire project might falter. For TKO, Tate said he sets up the a similar plan to manufacture the garments.
“Coming from businesses outside of apparel gives me the benefit to look from the outside in,’’ he said. “If I follow this critical path that I make up, I can tell my clients to the day when they will receive their delivery. It’s worked out really well so far. Since we started the business in 1996, we have not lost one client.”Earlier this year, TKO joined forces with the New York-based sourcing firm Evolution to expand TKO’s operations. TKO currently produces garments in the Dominican Republic, Costa Rico, Mexico, Vietnam and Honduras. Evolution has sourcing capabilities in Russia, China, Pakistan, India, Peru and Italy. Together, the two companies have forged strategic alliances with about 20 separate sewing factories around the world. This partnership, Tate said, makes the company a full-service apparel firm.
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