Perry Ellis International Inc. is expanding its profile with a deal to buy Rafaella Apparel Group Inc. from Cerberus Capital Management.
This story first appeared in the January 10, 2011 issue of WWD. Subscribe Today.
The purchase price includes $70 million and 106,564 warrants to purchase Perry Ellis stock. The deal is expected to close by Jan. 28 and will help the company expand its women’s offering.
The transaction helped lift Perry Ellis shares $2.77, or 10.6 percent, to $28.84 Friday after they reached a new 52-week high of $30.24 earlier in the day.
“Perry Ellis will immediately become a more significant player in the women’s apparel industry,” said George Feldenkreis, chairman and chief executive officer.
Rafaella designs, sources and distributes women’s better sportswear. The business had revenues of $122 million and adjusted earnings before interest, taxes, depreciation and amortization of $12.4 million for the 12 months ended Sept. 30.
That puts the purchase price at 5.9 times adjusted EBITDA.
Rafaella ceo Christa Michalaros will become group president of all the company’s women’s brands, including Laundry by Shelli Segal and C&C California.
The acquisition also brings the company a Hong Kong sourcing office and a platform to potentially launch other brands into women’s sportswear. On a conference call, Oscar Feldenkreis, president and chief operating officer, said the company has been considering Laundry sportswear as well as, over the longer term, the relaunch of a Perry Ellis women’s line.
Gilbert Harrison, chairman of Financo Inc., which advised Rafaella on the transaction, said the wholesale side of the fashion business would continue to consolidate.
“There are an awful lot of very profitable private wholesale companies out there, like Rafaella, that are doing $50 million or $100 million to $200 million,” Harrison said. “There are going to be more and more opportunities like this.”
Cerberus acquired Rafaella in 2005.