Three private debt managers financed Differential Brands Group’s (DFBG) acquisition of Global Brands Group’s licensing business, which includes a diverse set of brands such as Disney, Under Armour and Michael Kors.
Ares Capital Management, HPS Investment Partners and GSO Capital Partners are slated to back the purchase with a $1.3 billion financing, according to an announcement. The lenders will also provide equity co-investments alongside the GBG existing management team and other co-investors.
Tengram Capital Partners, a Connecticut-based private equity firm that specialises in the consumer sector with $591 million of assets under management, is a shareholder. Its managing partner, William Sweedler, also chairs DFBG’s board of directors. As DFBG’s biggest shareholder, Tengram will convert all of its preferred stock into common stock after the purchase is complete, expected in the third quarter.
GBG agreed to the sale of its licensing business after the company’s shares, which is publicly traded on the Hong Kong Stock Exchange, dropped precipitously.
The retailer saw its publicly traded stock plummet 75 percent from a two-year high of HK$1.24 ($0.13; €0.15) per share to a low of HK$0.30 in the month before the deal was announced. Following the transaction, the stock popped from HK$0.31 a share to HK$0.51. GBG reportedly booked a loss for 2018 of $887 million.
Approximately 24 deals took place in which a retailer bought retailer in 2017, according to a report by Internet Retailer. Twenty of those retailers sold for an aggregate price of $49.89 billion, based on disclosed terms. Eleven of the 24 transactions involved apparel retailers. Given a flattening in topline growth, it appears that strategic buyers in the retail industry remain motivated to grow via M&A.