Jay Hype PacSun

San Francisco private equity firm Golden Gate Capital said Thursday it has created a new operating company set to house its Eddie Bauer and Pacific Sunwear of California businesses following reports last month of a possible merger of the two retailers.

The operating company, PSEB Group, would be made up of more than 700 stores with sales estimated to hit $1.5 billion this year. About $400 million of that would be generated via the two retailers’ online businesses, Golden Gate said. Each retailer came under the Golden Gate fold when they were acquired out of bankruptcy by the firm.

Eddie Bauer chief executive officer and president Mike Egeck will serve as ceo of the new entity once the deal closes some time in the third quarter.

“Eddie Bauer and PacSun are powerful brands with differentiated, loyal customer bases. By creating PSEB and investing additional equity, we will accelerate the growth trajectories for both businesses, while preserving the autonomy and discrete cultures of each brand,” said Golden Gate Capital managing director Josh Olshansky in a statement. “Both brands have made great progress in the past 24 months and have generated strong performance. Bringing these two brands onto a shared platform will allow us to fuel this momentum and unlock their next stages of growth.”

The brands would remain separate, with Golden Gate affirming in its announcement that “Eddie Bauer and PacSun stores will continue to operate as usual and customers will experience no changes.”

The brands cater to different customer bases. Bellevue, Wash.-based Eddie Bauer, which saw same-store sales up 6.5 percent in 2017 and up 6 percent so far this year, has long served an outdoor demographic.

PacSun, while rooted in the action sports space, has over the years evolved to a heavier focus on fashion brands. The Anaheim, Calif.-based chain’s comparable sales last year rose 5 percent and year-to-date are up 8 percent.

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