TRACY/BAIN DEAL OFF; ‘COMPANY NO LONGER FOR SALE,’ SAYS GALLEN
Byline: Janet Ozzard
NEW YORK — Ellen Tracy is off the block.
Calling it a “mutual decision,” Ellen Tracy chairman Herbert Gallen said a deal for Boston-based Bain Capital Inc. to buy his $250 million bridge sportswear company has been terminated.
Gallen contended that the decision was reached “a few weeks ago,” but its disclosure comes on the heels of Jay Margolis’s defection to become the chairman and chief executive officer of Esprit de Corp., the San Francisco-based junior sportswear company. Margolis, a former executive at Liz Claiborne and Tommy Hilfiger, was to have become heir apparent to Gallen at Ellen Tracy in the Bain deal.
However, Margolis had also been working on a deal with Esprit founder and owner Susie Tompkins to take the reigns at that troubled firm. Margolis told WWD that he’d officially dropped out of the Ellen Tracy deal last Thursday, signed the Esprit papers on Friday and started working in the showroom on Saturday.
Nevertheless, Gallen in a phone interview Wednesday, insisted that Margolis’s departure had nothing to do with the collapse of the sale to Bain.
“There is no deal, and there will be no sale,” said Gallen. “[Jay] had nothing to do with it. We had decided we were going to call the deal off a few weeks ago. It was a mutual decision” between Ellen Tracy and Bain.
On Monday afternoon, Gilbert W. Harrison, chairman of Financo Inc., which helped broker the deal, said that Margolis was a “critical part of the strategy for the continued growth of Ellen Tracy. We are re-evaluating the issue.”
However, when contacted Tuesday, shortly after a meeting with Gallen, Harrison confirmed that the Bain deal was dead.
Financo invested close to a year in the deal, which was announced in October after months of industry rumors.
Gallen said he would not be pursuing any business deals in the near future, with Financo or any other firm.
“I’ll be here for another 50 years,” said the 80-year-old executive.
Industry reports said that friction between Gallen and Margolis may have fueled Margolis’s decision to decline a post with a stable, profitable and highly respected bridge sportswear company in favor of a top post with equity at a West Coast junior firm whose financial picture has been somewhat shaky in the last few years.
In an interview with WWD last October, Gallen said Margolis would take over the reins “after he proves to be worthy of running the company.” That comment reportedly rankled other principals in the deal, who viewed Margolis’s position atop Tracy as guaranteed, not conditional.
Gallen still maintains absolute control over his firm and has no visible successor inside the company. He and design director Linda Allard, 55, and an equity holder, make virtually all the decisions regarding design and business direction.
When asked if he might beef up the internal structure or bring in a middle-management level, he replied: “Not at the minute, but we would consider it down the road.”
Ellen Tracy enjoys an excellent reputation among its retailers for its quality, fair pricing and design consistency. Gallen has purposely kept the firm’s licensing deals to a minimum, claiming that he did not want to lose focus. It currently has eyewear, scarves, handbags, hosiery, footwear and a home furnishings license, as well as a deal with Itochu Fashion Systems for Asian business.
The secondary line, Ellen Tracy Company, has been undergoing some design changes in an effort to settle on a more casual identity.