NEW MONEY GROUP GETS CEO: STEPHEN L. RUZOW
Byline: Eric Wilson
NEW YORK — The American fashion conglomerate-to-be that’s operating under the name Pegasus Apparel Group had a major development Thursday with the appointment of a new chairman and chief executive officer: industry veteran Stephen L. Ruzow.
Ruzow, 56, has held top jobs at a number of apparel companies during his 38-year career, including Gottex, Donna Karan International and Warnaco Group, where he was most recently president of the Calvin Klein underwear and accessories division until his resignation in October.
WWD learned that Ruzow, who holds an equity stake in Pegasus, has actively been involved since February in the formation of the firm, which made its first acquisition last week by buying a majority stake in eveningwear vendor Pamela Dennis from Samsung Group of South Korea. Pegasus is also said to be negotiating deals with New York designers Daryl Kerrigan of Daryl K, Miguel Adrover, Cynthia Rowley and John Bartlett.
Additionally, Louis Praino has been named executive vice president of worldwide sourcing for Pegasus and will report to Ruzow. Praino had worked with Ruzow at Donna Karan in a similar role and most recently worked at Anne Klein.
In an exclusive interview, Ruzow said Pegasus Apparel Group will operate with assets from a private equity fund operated by the Greenwich, Conn., based Pegasus Capital Advisors, a money manager for institutional investors such as corporate pension plans.
As reported, investment banker Seth Bogner, president of Union Square Partners, will have an equity stake in the apparel group, but his role in that company is focused on constructing acquisition transactions.
Pegasus Capital Advisors operates private equity funds valued at over $800 million. One fund manages investments in companies like Garfield & Marks, which recently bought the Kenar label out of bankruptcy, and a second fund, which will act as the holding company for Pegasus Apparel Group, also financed the acquisition of Equal tabletop sweetener from Monsanto Co. for $570 million last week, in addition to the Pamela Dennis buy.
“We plan to create a luxury group conglomerate, which has not been done before in the U.S.,” Ruzow said. “I thought the idea was extremely appealing at this point in my life.”
Pegasus is mounting a campaign to form a holding company of upscale American fashion labels patterned somewhat after European luxury conglomerates like Gucci Group, Prada and LVMH Moet Hennessy Louis Vuitton.
The company is looking to acquire eight to 10 companies within two years, Ruzow said. The profile for potential takeover targets is companies with between $10 million and $20 million in revenue and strong global growth potential, although there is also a possibility that Pegasus would buy a $200 million to $300 million company that could act as an anchor label for the group, which would be reflected in its eventual corporate name, like the Louis Vuitton in LVMH.
“We have more than ample funds to do that,” Ruzow said. “Plus, we have access to any kind of normal apparel funding.”
Ruzow stressed that the scope of companies targeted by Pegasus is not limited to apparel firms, start-ups or strictly designer-priced merchandise. Pegasus is also considering investments in advertising agencies and public relations firms, he said.
“We will start with a base of American designers, but we definitely want to expand into cosmetics, handbags and accessories,” he said. “We are not putting ourselves in a box. If there was a situation where a company came along and had a product that was perfect for Kmart or Wal-Mart, we would not automatically say ‘No.”‘
While a deal with Rowley was initially said to be the next deal in line, sources close to Pegasus identified Daryl K and fashion newcomer Miguel Adrover as the next likely acquisitions, both possibly taking place by the end of the second quarter.
Ruzow declined to discuss any potential acquisition targets.
Since Rowley is more established financially than the other three identified targets, there is less pressure for her to strike a deal, sources said. Adrover, on the other hand, claims to be living hand-to-mouth since he presented a breakthrough fall collection last month that established him as fashion’s star of the season.
Kerrigan has said in recent interviews that she was ultimately looking to hand over manufacturing and distribution responsibilities to the right partner, while Bartlett recently broke his financial ties with Byblos after continuing friction with Donatella Girombelli, ceo of Genny, Byblos’s corporate parent.
Ruzow described Pegasus’s role as a holding company that would take small brands with growth potential and build them through their own retail stores and international sales. He projected that within five years, the average volume for Pegasus’s fashion firms would be $40 million to $50 million.
“We know that not every brand we pick is going to be a winner, but what we are about is building and globalizing a brand,” he said. “We do have the resources to do that, and if there is a blip, we will have the resources to call upon to fix that up.”
Some divisions are expected to be stronger than others, and depending on the size and potential of each brand, individual company presidents and chief operating officers may be named.
“Forget the idea of an acquisition,” Ruzow said. “This is a partnership. A lot of design companies have talent, but not means. We are not only a financial investor, we also bring a high level of management to the table.”
Pegasus plans to operate combined financial, distribution and retail operations for the companies, while leaving creative control over product in each designer’s individual realm, Ruzow said. Designers will also maintain their own showrooms, as well as design, sales, merchandising and public relations staff.
At the corporate level, Pegasus Apparel Group is expected to have about 23 positions overseeing its various divisions by the end of 2001. There will be eight direct reports to Ruzow, including Praino, a chief financial officer, a chief operating officer and senior positions for licensing, wholesale, retail and public relations.
The company will operate out of offices on the 27th floor of 530 Seventh Avenue as of June 1, Ruzow said. There will also be space there that could act as a showroom for a small company, if needed.
Pegasus has also initiated production contacts in Milan, Florence and Naples in Italy, as well as in Hong Kong and South Korea, that will become the groundwork for Pegasus to leverage the combined operations of its designers, just as it could with magazine advertising buys and negotiating real estate.
Ruzow described his role in the company as having two major functions in the coming months. His priorities are to staff the company with seasoned executives and to look at potential business opportunities on a daily basis.
“Having worked with Donna Karan, who I think is the most skilled women’s designer in America today, I understand what designers need, their temperament, what they do well and what they do not do well,” Ruzow said. “You can’t survive today being a small company in this business climate.”
Another of Ruzow’s top priorities is to stabilize Dennis’s business. To that end, Pegasus hired Allison Beer, who was at DKNY, as director of sales and merchandising and Luigi Napollitano, who worked for Anne Klein and was most recently freelancing, as vice president of production.
Also on the table is a daytime sportswear collection to be manufactured in Italy for spring 2001 at opening designer price points, and expanding Dennis’s eveningwear and separates business that she has already built with a strong celebrity following and by dressing stars at red carpet events like the Academy Awards. A bridal line is also a possibility for next year, Ruzow said.
“Pamela did really well at the Oscars,” Ruzow said. “Now our priority is to deliver for fall with quality product and design.”
Pegasus is also looking for immediate licensing deals for Dennis, who will maintain her showroom at 550 Seventh Avenue, for shoes, handbags and intimate apparel.
“The strategy for licensing is going to be different for each designer,” Ruzow said. “While the Europeans seem to have stopped all licensing, we’re going to opt for a combination of licensing with building products in-house.”
He plans to introduce companies operating under the Pegasus umbrella into Europe by first establishing a signature retail presence there that would house the entire breadth of a designer’s collection. A sales and public relations channel would be handled near each store in cities like Milan, Paris and London.
For Dennis, he plans to open a New York store first and projected Pegasus could open a European retail unit by fall 2001, provided the company is comfortable with the scope of its product by that time.
The deal with Pamela Dennis was quickly put together because there was a sense of urgency, since Dennis had resigned from her signature company in November because of friction with Samsung.
“There was an urgency to stage a fall runway show and to get her back into her showroom,” Ruzow said. “We have the ability to move very quickly, because there is not an issue of looking at companies and then figuring out where we are going to find the money to make a deal. Not having to go out to raise money for a transaction is a big plus.”
For Ruzow, it marks what he acknowledged could be the last job he takes during a career that has lasted over four decades. He noted that while he was exploring his options in January, he was looking for an opportunity that included a designer element and strong potential for retail, international development and licensing.
“If I had to write a job description of what I wanted to do at this point in my life, this defines it to a T.”