BUYERS PLAN TO REVIVE MONET’S PAST STRENGTH
Byline: Vicki M. Young / With contributions from Wendy Hessen
NEW YORK — The “well-funded investment group” that is offering up to $42.5 million to bail the distressed Monet Group out of bankruptcy plans to return the tarnished name to its former glory.
While declining to disclose the name of this group, James Cassel, president of Coral Gables, Fla.-based Capitalink, the investment firm representing them, told WWD Friday the investors are a “low-keyed group, a combination of domestic and foreign investors.” Cassel added, “The group is not fronting for a manufacturer.”
The principals in the group have some familiarity with the fashion and beauty sector. Some members in April made an investment in online retailer Beautyscene, a few days after the assets of the cash-strapped firm were turned over to a San Francisco-based trustee.
Jay Solomon, one of the investors, is chairman of Monet Acquisition Group, the holding company set up to buy the Monet assets. The deal is still subject to bankruptcy court approval in Delaware. The investment group, as stalking horse, could also be outbid for the Monet assets in a required bankruptcy court auction. The hearing on the purchase agreement and auction date is set for June 28.
“Our guys are financial buyers who see a terrific opportunity. They would like to get the company back to its grandeur. They believe the company [has potential] to be a lucrative and profitable business,” Cassel said. He added that their focus right now is on the turnaround; they have not decided what their exit strategy will be.
Unlike synergistic buyers, those who are in the industry and are often competitors, financial buyers often snap up a company at what they consider value prices because of potential for a bigger return on their investment down the road. In the case of Monet, Cassel noted that potential exit strategies include a sale of the company, public offering, merger or starting platform for other complementary acquisitions.
To be sure, there’s still the question of whether Monet and its two affiliated brands, Trifari and Marvella, can be turned around.
According to Cassel, “Monet is an interesting opportunity. It has good real estate in the stores. The investment group plans on keeping its placement in the Federated and May department store chains, as well as maintain its presence in Europe and Japan.” He noted that the current offshore manufacturing operation will be kept in place.
Whether Monet will be able to do that under new ownership remains a matter of conjecture. “In a marketplace that is brutal and evolving so quickly, you have to be vigilant, you can’t afford to take your eye off the business for a second,” said Patricia Stensrud, vice chairwoman of Victoria & Co. “Monet has been handicapped by ownership and management turnovers that you pay a price for in the long term. Unfortunately, they have lost critical shelf space [in department stores] which will be difficult to regain.”
Stensrud, who has presided over the turnaround at Victoria, including the purchase of another venerable name, Napier, said her firm had no interest in acquiring Monet. Asked whether the Monet Group brands should have been moved to mass market long ago, Stensrud said, “It certainly could have been considered, although that would have forced them to vacate the department store channel.”
“Monet has been mismanaged for the last five to six years,” said another industry executive who had participated in the bidding process the last time the company was the subject of bidding. “It would be pretty complicated to make up the losses there. Before that, the brands still had viability and the retail climate was different then.”
As reported, Monet and two subsidiaries filed for Chapter 11 in Delaware on May 11. The day after, the costume jewelry manufacturer issued a statement indicating that it had entered into an “asset-purchase agreement” with the unidentified group.
Under the terms of the purchase agreement, the investment group was required to provide a $1 million deposit. The investors are also required to add $10 million in new capital into the bankrupt company.
For the $42.5 million purchase price, the investors will get the Monet trademarks and related intellectual property rights. They also get Monet’s inventory; all accounts receivable, such as vendor discounts, credits and rebates; any assigned contracts; machinery, equipment and furniture of the bankrupt firm; real property; prepaid items; royalties, and records of the firm.
According to bankruptcy court records, even though Bear Stearns & Co. Inc. in October began sending an “offering memorandum” to prospective financial and strategic buyers, those efforts didn’t yield any results.
Cassel disclosed that his clients “recently entered the picture, and heard about the opportunity independent of Bear Stearns’ efforts.”
Bidding procedures for the auction, such as a break-up fee and dollar amounts for incremental bids, will be decided on Friday. Bear Stearns targeted 44 potential buyers. According to court records, those buyers were sent a copy of the court motion regarding the auction date and terms of the “asset-purchase agreement.” Any one of them or some other entity could come in and try to outbid Cassel’s investment group.
Some of the fashion industry players targeted by Bear Stearns are: A.T. Cross; Avon Products; Bulova Corp.; Citizen Watch Co. of America; Coach Leatherware Co.; Dooney & Burke; Estee Lauder; Etienne Aigner Group; Finlay Fine Jewelers; Fossil; Kellwood Co.; Kenneth Cole Productions; Krementz & Co.; Liz Claiborne; Michael Anthony Jewelers; Movado; Seiko Corp. of America; Swank; Swarovski Jewelry US Ltd.; Tandy Brands Accessories; Timex Corp., and Tsustaumi Jewelry Co. Ltd.
According to bankruptcy court records, Monet generated $100 million in sales during 1999. As of Feb. 26, the bankrupt firm had assets of $86 million and liabilities of $110.9 million. Monet, as of April 1, employed 900 full-time and part-time personnel.