NEW DESIGNER GROUP SIGNS ITS FIRST DEAL

Byline: Eric Wilson

NEW YORK — Fashion’s newest and poorest rising star, Miguel Adrover, may have found his financial knight in shining armor.
So might two of New York’s more established designers, Daryl K and Cynthia Rowley, who are said to be in advanced stages of discussion with the same money group for backing, deals that could create a foundation for the next conglomerate of fashion labels.
One clear sign that it’s happening — and happening fast — is that eveningwear designer Pamela Dennis confirmed on Friday she had already signed an agreement with the group to back her company.
So where is the money coming from?
Investors operating under the name Pegasus Apparel Group are mounting a campaign to form a holding company of upscale American fashion labels patterned somewhat after those of Gucci Group, Prada and LVMH Moet Hennessy Louis Vuitton in Europe.
One of the principals of Pegasus, Union Square Partners, is headed by Seth Bogner, an investment banker who also has a business called Bogner Equities Corp. He could not be reached on Friday, but sources close to the organization said that while he has been instrumental in bringing together various investors, he is not expected to act as chief executive of the proposed holding company and will function more as a board member or passive investor. The group of partners in the venture is working to identify other fashion and luxury lifestyle firms seen as brands with global growth potential.
A deal for Cynthia Rowley’s business could be announced this week, while Adrover and Daryl K’s Daryl Kerrigan have signed term sheet agreements with Pegasus, WWD has learned.
Another target is John Bartlett, who severed his ties with Byblos SpA last week and has discussed a deal with the group.
Pegasus signed its first deal Thursday night with Pamela Dennis, who, in November, broke her three-year-old ties with Cheil Industries, a subsidiary of Samsung Group of South Korea, because her original backer wouldn’t support marketing plans for the firm.
Dennis has built a strong reputation for social occasion looks by dressing a roster of celebrities, from Calista Flockhart to Liv Tyler, in sleek eveningwear and separates looks. However, her sales, at stores like Neiman Marcus, Saks Fifth Avenue, Bergdorf Goodman, Barneys and Nordstrom, were relatively small, estimated by market sources at less than $10 million.
Moments after signing the deal with Pegasus, Dennis boarded a jet bound for Los Angeles, where she was working on celebrity fittings with Sarah McLachlan, Sheryl Crow, Melissa Rivers and Kelly Lynch for Sunday’s Academy Awards ceremony.
Dennis’s absence from the January Golden Globes, she acknowledged, spoke volumes about the state of her business. Since announcing her departure from Pamela Dennis Inc. in November, Dennis has faced a chorus of rumors about the fate of her career, so it was important to her, she said, to get word out about her return at the Oscars.
Despite missing two crucial days in the race to dress celebrities, while she was signing the contracts with Pegasus, Dennis said it was important for her to have a personal presence in Los Angeles so that celebrities and stylists would realize she’s back.
“They’re backing me, thank God,” Dennis said, speaking from a seventh-floor suite at L’Hermitage in Beverly Hills, where she juggled a phone interview with McLachlan’s demands to find her shoes.
“We were hopeful all throughout the season that the deal was going to go through,” she said. “I kind of fell off the face of the world for a while, but I want my customers to know I am back.”
Pegasus will act as a financial holding company, and in Dennis’s case, the designer retains a minority ownership stake in her firm, as does Samsung, although company officials said it was a very small percentage.
She would not disclose the financial terms of the arrangement, but said that details of the structure of the organization would be disclosed within a couple of weeks.
“Seth [Bogner] and his group have a lot of investors and potential investors,” Dennis said. “I would call it an investment banking firm, and Seth is the mogul.”
Dennis’s major problem with her prior backer was that the company would not support marketing and public relations budgets for fashion shows and advertising campaigns, which the designer feels is a crucial step toward building her celebrity cachet into a meaningful business.
“It is very exciting for me to have a group that understands this now. They want to make this business into what every designer dreams of,” Dennis said.
Among the initial plans for her business are licenses for shoes, handbags and accessories, she said.
Pegasus is also setting up offices in Milan and plans to move some of her production to Italian factories.
Dennis said she interviewed more than 25 potential backers before forming the deal with Pegasus.
“At every meeting. I’d throw all my fashion covers and all my p.r. on the table and explain that I have a good product and sell-through,” she said. “I just needed the foundation and someone with the vision to help me move forward, who understands it takes a lot to make this happen to be competitive with the big guns.”
The prospect of sharing production and marketing facilities with other designers through Pegasus was also appealing to Dennis.
“I feel very flattered, like a little poster child for their other investments,” she said. “Hopefully, all of them will pan out. I’ve been searching and lawyering and accounting and doing everything but designing product just to keep my head above water. I really just wanted to be a designer and work with people again.”
Pegasus is expected to operate with 10 to 12 principal partners and with financial interests in a number of design houses.
And while its initial investments will be in smaller houses, the company’s business model follows those in Europe such as Bernard Arnault’s LVMH, Gucci and Prada, which have invested heavily in multiple luxury labels.
LVMH, which includes couture houses Christian Dior and Givenchy as well as Louis Vuitton, Celine, Loewe and Kenzo, has aggressively acquired fashion, luxury and Internet companies in the last two years, including purchases of Pucci, Thomas Pink, Hard Candy, Laguna, Tag Heuer and Benefit, as well as stakes in Marc Jacobs, Michael Kors, Regina Rubens and Boo.com.
In December, it teamed up with Prada to buy Fendi for about $1 billion.
Gucci, meanwhile, acquired Yves Saint Laurent, Sanofi Beaute and Sergio Rossi as part of its mission to create a world-class luxury goods conglomerate. And Gucci is currently in talks to back a collection for former YSL men’s designer Hedi Slimane.
While Europe has a long roster of consolidators, most U.S. companies have historically increased their brand stables through licensing and small acquisitions, with Jones Apparel Group being one of the most aggressive pursuers, particularly for its deal to buy Nine West as well as another deal for Sun Apparel.
However, there are signs that’s beginning to change, as evidenced by the number of deals struck in the last year. Among them, Liz Claiborne acquired Laundry by Shelli Segal and Segrets, Kasper ASL bought Anne Klein, Warnaco bought ABS, Neiman Marcus took a majority interest in Kate Spade and Leslie Fay bought The Warren Group.
As the climate to consolidate continues, several firms have emerged as potential takeover targets. While designers have struggled to maintain their independence, they also face increasing pressure to join with larger firms to secure better production and marketing abilities.
Adrover, who wowed the fashion world with his second collection shown here in February, has been living hand-to-mouth as he has been working to secure a backer so that he can translate critical success into retail sales.
The 34-year-old designer closed his own store, called Horn, in Manhattan’s East Village this month to concentrate on his signature line.
Kerrigan recently signed on as a creative consultant for Tommy Hilfiger, although that deal did not include a financial move into her business.
Last year, she moved production to Italy and also launched a men’s wear line, in addition to Daryl K and K-189. Kerrigan also opened a Los Angeles store and signed a licensing deal with Onward Kashiyama to manufacture, sell and distribute K-189, her secondary line, in Japan.
Bartlett broke off his licensing agreement with Byblos last week after continuing friction with Donatella Girombelli, chief executive officer of Genny, Byblos’s corporate parent. Bartlett also had an agreement with Byblos to produce his signature men’s and women’s collections that will end with the fall 2000 collections, leaving him free to find another manufacturer.
Rowley has recently signed a jeanswear license with Aris Industries and a leather outerwear license with Reilly Olmes and has been said to be looking for other growth vehicles.

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