Authentic Brands Group has signed an agreement with VF Corp. to acquire the Nautica brand.
Terms of the deal were not disclosed. The transaction is expected to close in the second quarter, and represents ABG’s largest brand acquisition to date. Once closed, ABG’s brand portfolio will total nearly $7 billion in annual global retail sales. The disclosure of the deal confirms a WWD report on Sunday.
Nautica has more than $1.2 billion in annual retail sales, and 73 stores in the U.S., as well as an e-commerce presence.
Jamie Salter, chief executive officer of ABG, said in a telephone interview, “Nautica is a world-class brand.” He noted that the brand has 270 retail locations globally and “5,000 points of distribution around the globe.”
Salter gave a shout-out to the mergers and acquisitions teams at both VF Corp. and ABG for their hard work in the past several weeks, which resulted in the ceo giving himself a big birthday present via the signing of the deal Saturday night, the same day as his birthday.
He said a separate operating company called Aero OpCo – formed in partnership among ABG, Simon Property Group and General Growth Properties when it acquired teen retailer Aéropostale out of bankruptcy in 2016 – will operate Nautica’s retail stores in the U.S. and its wholesale business. It will essentially become Nautica’s core licensee and the wholesale business will sell to retail doors overseas and domestically.
That represents a new model for ABG, and Salter said there are plans for Aero OpCo to operate more retail stores for ABG’s other brands over the next few years. “We are already mapping out store [locations] for Juicy Couture and Spyder,” he said.
As for Nautica, Salter said, “We will expand Nautica’s consumer product categories and presence around the world. We are also seeking long-term retail partnerships to strengthen the brand’s business globally. Nautica brings ABG closer to its goal of a 50-50 mix of domestic and international businesses. Our current international [component] represents 40 percent of our total business.” The ceo’s said there’s opportunity for the “marine” theme, and for footwear, and noted that there is also greater room for the brand to broaden its “outdoor” presence, which it isn’t in now.
All of Nautica’s marketing and licensing staff will join ABG upon completion of the transaction, while Nautica employees who work on the retail, wholesale and operations side of the business will work for Aero OpCo, according to Salter.
As for future acquisitions, he said the company is close to possibly signing two more transactions this year, with one in the family entertainment space. There are also six more ideas that ABG is considering.
“I would like to be over $8 billion in annual global retail revenues going into 2019,” the ceo said. ABG’s goal is to get to $10 billion in annual global retail sales by 2020.
ABG’s two majority investors are private equity firms Leonard Green & Partners and General Atlantic. It also counts Lion Capital as a minority investor.
Given the significant stake taken by General Atlantic last year, Salter said he’s now focused primarily on acquiring brands that have global retail sales of between $750 million and $2 billion, with $1 billion as the so-called “sweet spot.”
But Salter also said there’s another criteria that’s required: “Global is what’s important to us. The brand must have significant brand awareness internationally.” And while most Western brands already have a strong presence in the U.S. and Europe, Asia and Latin America have become important markets for ABG and are areas the group is looking to for growth opportunities when considering which brands to buy.
The company just opened an office in Shanghai and there are plans to open others in London, Mexico City and Los Angeles later this year.
While apparel and footwear remain sectors ABG continues to explore for deals, it is also looking at entertainment, particularly in the “content entertainment business. We feel that’s an area we can grow with our global footprint. We are looking at some media properties in that area,” ABG’s ceo said.
Other possibilities include music properties, similar to its stake in Elvis Presley, and beauty. “We want to get into the beauty business. Beauty goes well beyond fragrances and makeup. It’s also personal care. And we are looking at home as another area for expansion,” Salter noted.
ABG’s in-house Digital Innovation Group developed a proprietary social media influencer platform for its brands, which now counts more than 214 million social followers across its portoflio. The company runs the platform through Winston, which powers the influencer programs for Juicy Couture, Aéropostale, Spyder, Airwalk, Tretorn and Jones New York. According to Salter, all 30 of ABG’s brands will be integrated through the platform. Nautica will join the group following its acquisition by ABG.