Placing on hold its plans to go public, as previously announced in July, the Authentic Brands Group (ABG) has decided to stay private. Instead of going for an IPO at this stage, some existing shareholders will sell significant stakes in ABG to funds advised by the private equity company CVC Capital and the hedge fund HPS Investment in a transaction that values the group at $12.7 billion in terms of enterprise value.
Aside from its high indebtedness, the valuation looks high for a company that reported net income of $211 million on revenues of $489 million for the latest financial year. On the other hand, its planned acquisition of Reebok for up to €2.1 billion, which is set to be completed during the first quarter of 2022, will raise the retail-equivalent sales of the 30-plus companies in its portfolio to over $20 billion.
ABG has expanded considerably since it was established in 2010, apparently with better financial results than other brand management companies such as the Iconix Brands Group and the Sequential Brands Group. Aside from big retail properties such as Barneys New York, Brooks Brothers and Forever 21, the brands in ABG’s active lifestyle segment currently include Airwalk Eddie Bauer, Izod, Greg Norman, Prince, Spyder, Tretorn, Tapout, Vision Street Wear and Volcom.
Following their acquisition of shares in ABG, which should be completed in December, CVC and HPS, a fund spun off by J.P. Morgan Asset Management in 2016, will both have seats on the group’s board of directors. Given its global footprint and its experience in many markets around the world, CVC is expected to help ABG to expand internationally.
BlackRock Long Term Private Capital, which first invested in ABG in 2019, will remain the largest shareholder overall. Jamie Salter, founder and CEO of ABG, will reportedly remain the largest individual shareholder, with he and other members of its management holding about 20 percent of the shares. Besides Shaquille O’Neill, the famous basketball player, other important shareholders will be the Simon Property Group, General Atlantic, Leonard Green & Partners, GIC, Brookfield, Lion Capital and Jasper Ridge Partners.
Salter reportedly told CNBC that he has signed on to remain ABG’s CEO for another five years, and that the new target date for the IPO is 2023 or 2024. Indicating that the company expects to make another significant acquisition before the end of the year, he told WWD that it will have more flexibility by remaining private.
BofA Securities served as the M&A advisor for ABG in the latest transaction. BofA Securities and Goldman Sachs acted as financial advisors for ABG. Latham & Watkins served acted as its legal counsel.
