Liz Claiborne, Inc. recently announced that it has agreed to sell its global Mexx business to a joint venture in exchange for 18.75% of the common equity of the joint venture and total cash consideration of $85 million, subject to working capital closing adjustments, which includes $60 million of ABL facility debt that is expected to be assumed by the joint venture and refinanced at closing. The Gores Group will own an 81.25% majority interest in the joint venture and has also committed to supporting the business through its ongoing turnaround. The global Mexx business will continue to be led by Thomas Grote as Chief Executive Officer, while Lloyd Perlmutter will continue as Chief Executive Officer of Mexx Canada. The transaction is expected to close in the fourth quarter.
Transaction Highlights:
- strengthens Liz Claiborne’s financial position;
- enables the Company to de-consolidate the losses from Mexx;
- requires no further cash investment in Mexx by the Company;
- receives total cash consideration of $85 million, net of working capital closing adjustments, which further de-levers the Company, contributing to its goal of reporting 2011 year end debt below that of 2010’s year end debt of $578 million; and
- retains an 18.75% interest in the joint venture which gives the Company and its shareholders the ability to participate in the long-term growth potential of Mexx.
William L. McComb, Chief Executive Officer of Liz Claiborne, Inc., said: “We’ve brought the Mexx European business to the early stages of a true turnaround. But there is more to be done, and in uncertain times and true market volatility, de-risking became essential. This transaction balances risk mitigation, debt reduction, and ongoing upside realization in just the right mix for our shareholders. The forecasted 2011 Adjusted EBITDA loss of approximately ($25) million associated with the global Mexx business will be eliminated. The Gores Group is an ideal partner for the Mexx business given its extensive experience in successful corporate carve-outs and growing presence in the apparel retail sector. With 2010 revenues of over $730 million, we believe the Mexx business will ultimately thrive under Thomas Grote’s continued leadership as a private enterprise after the completion of this transaction.”
Mr. McComb concluded: “We’ve made a lot of important changes in the past few years, primarily transitioning Liz Claiborne, Inc. to be a more brand-centric and retail-based company, and every decision we make is driven by how to do so as effectively, efficiently and dynamically as possible. At the close of this transaction, we will be a more capital efficient, growth-oriented company and will be able to fully turn our attention to building and growing our core portfolio of global lifestyle brands.”
Thomas Grote, Chief Executive Officer of Mexx, said: “Taking the Mexx business private is a logical and important step. We have identified a winning product and merchandising direction that re-activates the strong positive attributes of the Mexx brand, and we are gaining traction now. The new partnership between Gores and Liz Claiborne will give us the ability to fully carry out our work and maximize Mexx’s full potential.”
Alec Gores, Founder and Chairman of The Gores Group, said: “We are excited to partner with Liz Claiborne, Inc. and to back this management team to continue the turnaround efforts which are well underway. This transaction serves as a prime example of our ability to apply our extensive carve-out experience to the retail sector, and we see an excellent opportunity to create value and rebuild a great brand.”
Perella Weinberg Partners advised Liz Claiborne, Inc. on the transaction and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel.
Liz Claiborne, Inc. will sponsor a conference call at 4:30pm EDT on Tuesday, September 6th to discuss this transaction. The dial-in number is 1-888-694-4676 with pass code 97317036. The web cast and slides accompanying the prepared remarks can be accessed via the Investor Relations section of the Liz Claiborne website at www.lizclaiborneinc.com. An archive of the webcast will be available on the website. Additional information on the results of the Company’s operations is available in the Company’s Form 10-Q for the second quarter of 2011, filed with the Securities and Exchange Commission.
About Liz Claiborne, Inc.
Liz Claiborne, Inc. designs and markets a global portfolio of retail-based premium brands including Juicy Couture, kate spade, Lucky Brand and Mexx. The Company also has a refined group of department store-based brands with strong consumer franchises including the Monet family of brands, Kensie, Kensiegirl, Mac & Jac, and the licensed DKNY® Jeans and DKNY® Active brands. The Liz Claiborne and Claiborne brands are available at JCPenney and the Liz Claiborne New York brand designed by Isaac Mizrahi is available at QVC.
Information on The Gores Group, LLC
Founded in 1987, The Gores Group, LLC is a private equity firm focused on acquiring controlling interests in mature and growing businesses which can benefit from the firm’s operating experience and flexible capital base. The firm combines the operational expertise and detailed due diligence capabilities of a strategic buyer with the seasoned M&A team of a traditional financial buyer. The Gores Group, LLC has become a leading investor having demonstrated over time a reliable track record of creating substantial value in its portfolio companies alongside management. The firm’s current private equity fund has committed equity capital of $4 billion. Headquartered in Los Angeles, California, The Gores Group, LLC maintains offices in Boulder, Colorado and London. For more information, please visit www.gores.com.
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