Individualized Apparel Group on Tuesday said it has signed a definitive agreement to purchase substantially all the assets of Coppley Corp., the Canadian custom clothing manufacturer owned by the bankrupt HMX Group.

This story first appeared in the November 7, 2012 issue of WWD. Subscribe Today.

According to court papers, the purchase price was $3.5 million and the agreement is subject to court approval in the U.S. and Canada.

The privately held IAG, which owns Oxxford Clothing, H. Freeman, Corbin, Tom James, Gitman, Individualized Shirts and the Holland & Sherry textile business, among others, has built its business on custom apparel production and direct selling. It owns seven factories in the U.S. and another in Chile and boasts that it is the “largest purveyor of luxury men’s apparel still manufacturing in America.” Its volume is estimated at about $300 million, not counting the Tom James retail business.

“Coppley has a tremendous reputation in the marketplace,” said IAG president and chairman Joe Blair. “They have worked diligently to build great loyalty from their customers both in Canada and the U.S. We have admired them for years as a worthy competitor and we are excited to have them join our IAG team of companies.”

Blair said Warwick Jones, executive chairman of Coppley, will remain on board along with the company’s entire 400-person management and factory team. “We’re not making any changes to the business,” he said. “It’s well run, it was just lacking capital.” The factory in Hamilton, Ontario, will be retained. “We are factory people,” Blair said. “We are the last of a vanishing breed, but we make it work. The custom and luxury business is quite good and all of our factories are doing well.”

Jones said the Coppley team is relieved to find its white knight. “This is a very happy day for us and our employees,” he said. “It had been an emotional roller coaster. But IAG has a similar culture and thinking — they get custom, and they also value relationships with retailers. We’re primarily a specialty-store operation.”

Jones said Coppley’s business is 40 percent custom, 40 percent off-the-rack and 20 percent in-stock and its ability to turn around a custom garment in seven days is “our DNA. Coppley has produced tailored clothing continuously since 1883. We are proud of our Made in Canada heritage. This arrangement will provide us the expertise and financing to restore the Coppley business.”

While the sale of Coppley sorts out one issue in the bankruptcy of HMX, Workers United, the union representing factory employees for the group, isn’t happy with the “stalking horse” proposal to sell intellectual property assets to Authentic Brands Group and have the Doug Williams-controlled entity run the operations. Williams is the chief executive officer of HMX.

Last week, lawyers for the union filed an objection to the proposed bid in Manhattan bankruptcy court, claiming that the proposal is “flawed because it would breach critical worker job protection provisions” in the existing union contract for the Rochester and Chicago plants. Union workers at all three factories, including the Coppley factory, comprise a total annual payroll of $21.5 million owed by HMX under the collective bargaining agreement, court papers said.

Among the chief complaints is that the union contract is not identified in the bid as an obligation to be assumed by the acquirer. More specifically, the union noted that the licensee, the Williams-controlled entity, “may offer” employment to union workers, leaving open the possibility that the operating business might exercise its option to decline employment to existing factory workers covered by the union contract.

Since the IP assets are being separated from the operating business under the proposed deal, the union argued that if the IP owner and the operating unit fail to agree on a licensing agreement, those existing factory jobs can be licensed to another group not covered by the union agreement. However, according to Williams, “The operating company that will be set up will be assuming all the union collective bargaining agreements and we’ll be operating both factories in Chicago and Rochester.”

The final hurdle that Workers United raised is that the structure of the proposal has doomed the production component of the business. Its position in court papers was that a minimum royalty fee of $8.5 million for years one and two, followed by a $9.5 million fee in subsequent years, suggested that to meet the royalty payments the operating unit will likely look for cost savings that hurt union workers, whether from “outsourcing to low-wage foreign producers or reductions in wages and benefits in the production facilities.”

HMX on Monday received bankruptcy court approval on its bidding procedures for the auction that could bring a better offer than the one on the table from Authentic Brands Group. Sources this week said the two parties are in the midst of negotiating the license agreement and one change is an agreement that allows for four 10-year terms instead of the proposed three five-year terms that were originally filed with the bankruptcy court last month.