Iconix Brand Group Inc. wrapped up the acquisition of Rocawear and may have its sights set on another target: home textiles firm Pillowtex LLC, according to market sources.
The sources said if Iconix succeeds, it would have a home operation that could help leverage the other brands in the Iconix umbrella into lifestyle businesses.
Pillowtex was one of the top three textile firms in the U.S. Based in Kannapolis, N.C., it filed for Chapter 11 bankruptcy court protection in Delaware in July 2003, 14 months after exiting from its first tour of bankruptcy proceedings. In October 2003, the majority of Pillowtex’s assets were sold to a consortium for $128 million. Consortium participants include Gibbs International, Gordon Brothers Retail Partners, SB Capital Group and Tiger Capital Group.
A call to Gordon Brothers for comment was not returned by press time. A spokesman for SB Capital Group declined comment.
A Pillowtex board member, who requested anonymity, said that “Pillowtex is not for sale.” The board member acknowledged that Iconix has shown interest in Pillowtex and disclosed that Iconix has even made an offer or two. The board member reiterated that there are no discussions because Pillowtex is not for sale.
Executives at Iconix could not be reached in regard to Pillowtex.
Rocawear, which was sold to Iconix for $204 million in cash, and includes contingent payments of an additional $35 million of Iconix stock based on performance thresholds over the next three to five years, was described by Merrill Lynch analyst Virginia Genereux as “the premier urban youth brand.”
In a research note earlier this month, she said Iconix is getting a high royalty rate on Rocawear’s $350 million to $400 million in wholesale volume, with key wholesale deals between three to five years in length. In a subsequent note dated March 23, Genereux wrote that the Rocawear transaction is likely a “better case for success than other urban deals.”
Iconix management views Rocawear as a $1 billion retail opportunity, up from just over its current $700 million, according to the analyst. As reported, Jay-Z has stock in Iconix as part of the transaction and is also involved in a five-year joint venture with Iconix where they would look at brands and deals separate from the agreements that Iconix would do on its own.
David Conn, executive vice president at Iconix, said the company has “acquired nine brands in less than three years, and we think we can continue to be very acquisitive.”
“We see a lot of great brands out there but we’re going to be very, very disciplined and focus on buying great brands that are iconic and meet our investment criteria,” Conn explained. “We think diversification is very important with our business model and one of the things we look at when we evaluate brands is whether or not they diversify our portfolio.”
Conn went on to say that from the research the company has done, the urban market is “still growing two times as fast as the apparel industry in general. We don’t necessarily think of Rocawear as an urban brand. People buying Rocawear today are both urban and suburban, and of different ethnicity. We think this is a powerful new lifestyle brand of the next 10 years.”