What am I worth?
For most people it’s a metaphysical question to contemplate. For designers who build brands around their names, the answer comes to dollars and cents.
Kenneth Cole offered late Thursday to the buy the shares of Kenneth Cole Productions Inc. he doesn’t already own for $15 a piece, valuing the whole firm at $280 million. The company had a market capitalization of about $850 million during its high in 2000.
Cole is the latest designer to try to come to terms with the value of the businesses bearing their names. Michael Kors took his company public in December and it now has a market capitalization of nearly $8 billion. Chris Burch’s stake in Tory Burch is on the block and some think the sale could value the firm at $2 billion or more — although that’s seen as too rich by many.
Michael Kors and Tory Burch are both businesses that are seen as having plenty of room to expand and so they get premium valuations. Cole, who took his company public in 1994, is looking to get his stride back. The firm took its sportswear business in-house last year and has been closing stores, which contributed to a loss of $10.9 million for the first nine months of 2011 on sales of $315.6 million.
Jeff Van Sinderen, an analyst at B. Riley & Co., said Cole wouldn’t get the type of valuation that Kors enjoys, but that if the business turned around it would be worth “probably a lot more than $15 a share.”
Cole’s offer represents a premium of 14.8 percent over Thursday’s close. Analysts and investors think Cole will eventually pay more, and shares of the company jumped 18.5 percent to $15.49 Friday.
As commonly happens, a number of law firms began immediately seeking out shareholders and investigating whether or not the company’s board is fulfilling its fiduciary duty related to the proposed buyout.
The designer already owns about 47 percent of the company and controls 89 percent of the voting power. In a letter to the firm’s board late Thursday, Cole said he had “no interest in a disposition or sale of my interest in the company” and that he wouldn’t support “any alternative sale, merger or similar transaction.”
Sam Poser, an analyst at Sterne Agee, said the key for the business is brand positioning. “If they really want to be an opening price point designer brand, it’s probably better to do it without the pressure of being a public company,” Poser said. “It would allow them to be freer and to do things that are more creative for the brand.”
Steven Marotta, an analyst at C.L. King & Associates, said the company is headed in the right direction, having brought back Paul Blum as chief executive officer, closed stores and focused on improving its product.
“Kenneth perhaps feels like: become a private company, be nice and quiet for a bit, start to grow again and then have an exit strategy when growth prospects are better,” Marotta said. “That means selling a bit of the company or going public again. That’s what a lot of companies do. They go public, they go private, they go public, they go private and everybody tries to make money on the in and out.”