The battle for Brooks Brothers is heating up.
The venerable retailer is expected to file Chapter 11 bankruptcy within days and is analyzing potential stalking-horse bids before it takes the plunge, according to sources.
There are two leading contenders, sources said: Authentic Brands Group in partnership with Simon Property Group and Brookfield Property Partners, and WHP Global, the newly formed brand management firm headed by Yehuda Shmidman.
Other parties have also expressed interest but are considered long shots. These include Marquee Brands, Sequential Brands and a new name, Solitaire Partners, a luxury investment and advisory firm headed by David Jackson, the former chief executive officer of Istithmar World, which at one time owned Barneys New York. Jackson was also in the mix to buy Barneys last year but was unsuccessful, losing out to ABG, which bought the retailer and made a deal with Saks Fifth Avenue parent Hudson’s Bay Co. to at some point open Barneys shops within Saks stores.
Bids for Brooks Brothers are being submitted this week, according to sources, and the price is expected to be around $350 million.
“They’re pressing hard to make a deal,” one source said.
With its war chest of cash and its partnership with mall developers, ABG is seen as the company to beat. If its bid is accepted, ABG is expected to mimic the strategy it used to purchase Forever 21 for $81.1 million in February — in that deal, ABG and Simon each took a 37.5 percent stake in the intellectual property and operating business and Brookfield took 25 percent. The 448 stores were kept open, the company hired a new ceo, former H&M executive Daniel Kulle, and has been signing licensing deals in other countries. ABG was also involved in last week’s bankruptcy filing by Lucky Brand Dungarees, entering into a stalking-horse asset purchase agreement with Sparc, which operates ABG’s Nautica and Aéropostale brands. Under the terms of that deal, Lucky’s intellectual property would go to ABG.
ABG has become a major dealmaker in the fashion and media space. Last summer BlackRock, through its Long Term Private Capital arm, invested $875 million into the brand management company to allow it to expand more aggressively globally and digitally. Other partners in ABG include Leonard Green & Partners, General Atlantic, Lion Capital and the two mall developers.
Brookfield has also earmarked $5 billion to acquire non-controlling stakes in retail businesses struggling to meet their capital needs during the pandemic, so having the cash to buy Brooks Brothers is not an issue.
Soon after completing the BlackRock deal, ABG purchased Barneys for $271 million. It also bought Sports Illustrated last April for $110 million.
Although much smaller, WHP has proven itself to be a player in the brand management space. It too has easy access to cash. Oaktree Capital Management LP recently increased its investment in the firm to $350 million, bringing the total funds available for dealmaking to more than $1 billion. WHP was formed last July and so far has purchased the Anne Klein and Joseph Abboud trademarks.
Jackson is not seen as much of a threat to ABG or WHP in the race for Brooks Brothers. His firm, Solitaire, has so far focused its efforts primarily on the hospitality sector with mixed-use developments in New York, Amsterdam, Paris and London. And its access to funding is unclear. Jackson did not respond to requests for comment.
“It’s hard to compete against ABG,” one source said. “They have relationships and licensees all over the world and they’re partners with major landlords.”
Brooks Brothers, which celebrated its 200th anniversary in 2018, was purchased by Italian businessman Claudio Del Vecchio for $225 million in 2001. Although he spearheaded a significant improvement in the quality of the merchandise, increased its percentage of sportswear and expanded outside the U.S., the company’s sales have been holding steady at around $1 billion for the past several years. The brick-and-mortar stores are said to bring in $750 million and the e-commerce site another $250 million.
After an elaborate multi-continent celebration of its 200th anniversary, rumors surfaced that the 63-year-old Del Vecchio was considering selling the business and the company hired investment firm PJ Solomon to explore and analyze strategic options.
Although there was interest, a sale could not be struck and as a result of the pandemic, the company is now left with no other option than to file bankruptcy in order to make a deal. Brooks Brothers has already put in motion plans to close its three factories in the U.S. — in Garland, N.C.; Long Island City, N.J., and Haverhill, Mass. — this summer and many of its stores are believed to be unprofitable and will close during a Chapter 11 process.
Brooks Brothers had no comment on any potential deal or bankruptcy filing and ABG and WHP also declined to comment on Tuesday.