LONDON — Nicole Farhi’s new owners have big plans for the British brand, including internationally.
This story first appeared in the March 16, 2010 issue of WWD. Subscribe Today.
On Monday, OpenGate Capital, a Los Angeles-based private equity firm, said it had acquired the company — including its inventory, retail locations and intellectual property — for 5 million pounds, or $7.5 million at current exchange rates, from French Connection Group Plc. News of the deal was first reported on WWD.com on Sunday.
Designer Nicole Farhi will remain creative director of the label and Nicki Scordi, managing director of Nicole Farhi, has been named chief executive officer. Scordi said Monday that during the next 90 days as the deal is completed, management will discuss “growing the business internationally.”
“We want to be as present internationally as in the U.K.,” said Scordi. “Having a U.S.-based owner really adds to our ability to grow there.”
OpenGate said it plans to grow Farhi’s retail presence in cities such as Paris, Hong Kong, Tokyo and New York. French Connection said Monday that Farhi had an operating loss of 5.6 million pounds, or $8.8 million, in the year to Jan. 31 on sales of 21.7 million pounds, or $34.3 million. Dollar figures have been calculated at average exchange rates for the period.
However, Andrew Nikou, founder and ceo of OpenGate Capital, who will also serve as chairman of Nicole Farhi, said he expects the business to be profitable within its first year of being owned by the private equity firm. “[The company] has a great designer and a great management team,” said Nikou. “We’re in a position to invest to provide the proper air cushion for the label to grow wholesale distribution, retail, its online business and through different licenses.”
The deal, which was advised by lawyers Maxwell Winward for OpenGate while Osborne Clarke and Richard Morgan Advisory were legal and financial advisers to French Connection, is structured so OpenGate will pay an initial 500,000 pounds, or $752,000, when the deal is completed, and then 5 million pounds, or $7.5 million, in a series of yearly installments depending on the net cash the Farhi business generates each year.
The sale was part of a downsizing at French Connection, instigated by a strategic review begun last year with the aim to “enhance both profitability and cash generation.”
Stephen Marks, chairman and ceo of French Connection, said he was “quite sad” to see the business sold. Farhi launched her collection in 1983 as part of Marks’ business — the two were former partners and have a daughter together — after she had designed women’s wear at French Connection. “Obviously it was incredibly difficult,” said Marks. “[But] OpenGate have shown a great passion and have interesting plans for the business.”
French Connection also said Monday it would be closing the majority of its U.S. retail stores as part of the strategic review, taking the number of stores in America to six from 23. The store closures will cost 6.5 million pounds, or $9.8 million, the company said, but will result in an annual reduction in losses of 3.2 million pounds, or $4.8 million.
The closures and sale of the Farhi business were revealed Monday as French Connection reported net losses of 24.9 million pounds, or $39.3 million, in the year to Jan. 31, compared with losses of 16.4 million pounds, or $29.7 million, the previous year. The widening losses were partly due to increased losses from the group’s discontinued operations, including Farhi, 21 stores that were closed in Japan and the closure of the Northern European retail operations. The group’s revenues from continuing operations rose 0.3 percent, to 214.3 million pounds, or $338.6 million, from 213.6 million pounds, or $386.6 million, in the previous year.