Genuine Manufacturers Ends IPO to promote $ 12.7 billion stake to traders

Jamie Salter, Chairman and CEO of Authentic Brands Group LLC.

Norm Betts | Bloomberg | Getty Images

CNBC has learned that retailer Authentic Brands Group is putting a proposed IPO on hold and is instead selling significant stakes in its business to private equity firm CVC Capital, hedge fund HPS Investment Partners and a pool of existing stakeholders.

The deal is valued at around $ 12.7 billion and is due to be announced on Monday, the company said.

Authentic Brands’ portfolio companies include apparel retailers Forever 21 and Aeropostale, department store chain Barneys New York, men’s suit maker Brooks Brothers and Sports Illustrated magazine. The deal to buy sneaker maker Reebok is slated to close early next year, adding another brand to its inventory.

The company had applied for an IPO in early July. However, Jamie Salter, chief executive of Authentic Brands, said an IPO date is targeted in 2023 or 2024. He said he has committed to serving as CEO for another five years.

“The IPO climate is ridiculous,” said Salter in a telephone interview. “I think we would have gotten a massive rating … maybe even more than what we sold the business for. But guess what? I’d rather be private.”

In recent months, a wave of retail companies has entered the public market, from eyewear maker Warby Parker to fashion rental platform Rent the Runway to eco-friendly shoe brand Allbirds and e-commerce fashion website Lulus. Investors have preferred names with a strong presence on the internet, which allows some to receive ratings as if they were high-growth tech companies.

CNBC had reported that Authentic Brands was aiming for a valuation of around $ 10 billion on its public debut.

The transaction with CVC and HPS is expected to close in December this year. At this point in time, the PE company and the hedge fund each retain a seat on the Board of Directors of Authentic Brands.

“We plan to work closely with the ABG team to implement its strategic priorities, particularly with regard to international expansion,” said Chis Baldwin, managing partner at CVC.

BlackRock will retain its position as the largest shareholder in Authentic Brands, which it has held since 2019, the company said. Existing investors, including US mall owner Simon Property Group, General Atlantic, Leonard Green & Partners, Brookfield and basketball star Shaquille O’Neal, will hold onto their equity positions.

When it went public, Authentic Brands reported that its net income increased from $ 72.5 million a year ago to $ 211 million in 2020, while sales rose about 2% to $ 489 million is.

“We have the same playbook today as we did yesterday,” said Salter. “You will hear about more acquisitions by the end of this year.”

CVC recently closed a deal to purchase Unilever’s tea business. The company’s other portfolio companies include streetwear brand A Bathing Ape and pet retail chain Petco, according to its website. HPS was spun off from JP Morgan Asset Management in 2016.

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