By
with contributions from Sindhu Sundar
 on July 24, 2020
CD8

MILAN — Club Deal 8 (CD8) is expected to present an offer to take over Brooks Brothers on Aug. 4, according to sources here.

As reported, Italian entrepreneur Luciano Donatelli, who founded LD Consulting firm, has been leading a group of investors interested in buying the venerable retailer under the Club Deal 8 moniker. This includes Alessandro Giglio, president of online retailer Giglio Group; the Biella-based Gruppo Verzoletto; entrepreneur and environmentalist Brando Crespi, founder of Pro-Natura, which supports and funds sustainable projects; legal manager Lorenza Morello, and Studio Dentons as an adviser.

Sources say the offer will stand on three pillars: sustainability; a lower number of stores compared to the 125 proposed by Authentic Brands Group, which, as reported has stepped forward with a $305 million stalking-horse bid to purchase Brooks Brothers, and a greater emphasis on the online channel — hence the partnership with Giglio Group.

On Thursday night, Brooks Brothers revealed that it filed a motion in the United States Bankruptcy Court for the District of Delaware to obtain court approval of an asset purchase agreement with Sparc Group LLC, a company backed by ABG with its partner Simon Property Group.

The bid is to purchase substantially all of Brooks Brothers’ global business operations as a going concern and includes a commitment to acquire at least 125 of the company’s retail locations. Brooks Brothers is a prime tenant in many of Simons’ malls in the U.S.

Club Deal 8 is also said to be keen to protect the relationship with established customers while growing its business with Millennials.

If Club Deal 8 succeeds in taking control of Brooks Brothers, the goal, as reported, is to reach sales of $3 billion in five years and grow production sixfold. Donatelli sees sales of about $1.2 billion to be derived from the Americas; $1.2 billion from the Far East, and $600,000 from Europe and Russia.

As reported, Brooks Brothers is requesting that the deadline for competing offers be set for Aug. 5 and that a hearing to approve the sale take place on Aug. 11.

But Sparc won’t be without competition. WHP Global, the new brand management firm that has so far purchased Anne Klein and Joseph Abboud, is still hot on owning Brooks Brothers.

LD Consulting has an archive of five million items gathered over the past 40 years and spanning from 1906 to the Nineties, ranging from the Duke of Windsor’s shirts; Hollywood memorabilia from James Dean or Alan Ladd; the first Goyard collection; printed fabrics from tie and scarves collections by Gucci, Valentino, Ermenegildo Zegna and Leonard, and the first collection personally designed by Giorgio Armani for Blue Marlin, Zegna’s sea line, at the start of his career. LD Consulting has trademarked kashuna, which is a blend of 90 percent Mongolian cashmere and 10 percent vicuna.

Meanwhile in court proceedings in Delaware, Brooks Brothers’ landlords are opposing the retailer’s efforts to defer rent payments during the bankruptcy.

The company had moved to defer rent payments earlier this month, as a number of other retailers that filed for Chapter 11 during the COVID-19 pandemic already have. Brooks Brothers cited the effects of pandemic-related shutdowns on its sales, and sought a 60-day deferral of the roughly $7.2 million in monthly leases payments it owes on some 207 leases.

Companies in bankruptcy are generally required to pay their bills during the Chapter 11 process, but a feature of the bankruptcy code may allow such a rent deferral under certain circumstances. During the pandemic, bankruptcy courts have been inclined to grant such deferrals, and have done so in the ongoing bankruptcies of J. Crew Group and J.C. Penney.

Brooks Brothers has argued in court filings the pandemic had led it to furlough 2,900 employees, cut salaries and temporarily close stores, and imposed significant financial strain. The company projects its July revenues to be in the range of $9.6 million, and its operating disbursements to be roughly $14 million, according to a monthly operating report filed Thursday,

“The debtors, for their part, accordingly closed their retail and factory outlet stores worldwide – not only to comply with governmental health directives and guidelines, but also as an adjustment to the practical reality that, up until very recently, retail customers simply could not visit the debtors’ stores,” Brooks Brothers said in a filing this month.

A number of landlords have objected, including the Taubman landlords, who asked that the court offer them more protection in the case.

“The Taubman landlords understand the current complications faced by the debtors, however, the Taubman landlords are owed delinquent rent and will continue to have to expend funds related to debtors’ premise regardless of whether debtor timely pays rent to the Taubman landlord,” they said in their filing on Thursday.

A hearing on the issue is scheduled for July 30. A representative for Brooks Brothers declined to comment.

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