Li & Fung fashion spin-off Global Brands Group sells North American businesses for US$1.4b
Global Brands Group said the asset disposal is aimed at reducing debt largely left over from its 2014 spin-off
Global Brands Group (GBG), the fashion firm spun off from supply chain giant Li & Fung, will sell a significant part of its North American licensing business to Nasdaq-listed Differential Brands Group for US$1.38 billion to cut debt.
Chief executive Bruce Rockowitz said the asset disposal was aimed at reducing debt and lowering working capital. The company had a net debt of US$1.1 billion and gearing ratio of 40.6 per cent as of March 2018, much of it left behind from its 2014 spin-off.
“The divestment will improve our balance sheet and simplify the company, and is good value for shareholders,” said Rockowitz. “GBG will continue to be a global company and somewhat less reliant on the US, and more equally diversified going forward.”
The assets to be sold, valued at a total of US$1.28 billion, comprise all of its North American childrenswear and accessories businesses, and a majority of its West Coast and Canadian fashion operations. Among them is the label BCBG Max Azria, which GBG acquired last year for US$27.4 million after it filed for bankruptcy.
The company aims to close the sale by August 31, subject to shareholders’ approval.
The sale price of the assets is also more than half of their 2018 sales revenue of US$2.2 billion. They will be acquired by US fashion brand licensing firm Differential Brands Group, which Rockowitz described as similar to GBG but on a smaller scale.
The revenue of GBG’s remaining businesses reached around US$1.8 billion in 2018, meaning that the divested arm is worth around half the entire company.
The debt-ridden group’s revenue increased by 3.4 per cent to US$4 billion in the 2018 financial year, roughly in line with analysts’ expectations of US$3.99 billion according to Reuters data, with a net loss of US$887 million.
The divestment will cut GBG’s 7,000 employees by over half. GBG’s Europe and Asia-based brands, as well as its global brand management business, will stay the same.
The company, which licenses brands such as Juicy Couture, Calvin Klein, and Under Armour, will pay a special dividend to shareholders of up to HK$356 million, or 32.5 HK cents per share.
Global Brands – with a HK$2.65 billion (US$337.7 million) market capitalisation – was spun off from Li & Fung in July 2014, and sells branded children’s, men’s and women’s fashion, as well as footwear and accessories priced in the ‘affordable luxury’ range. Its shares fell 6.2 per cent to close at 30 HK cents on Wednesday.
The company, which licenses and distributes brands such as Juicy Couture, Calvin Klein, and Kate Spade New York, will pay a special dividend to shareholders of up to HK$356 million, or 32.5 HK cents per share. Its licence portfolio also ranges from Disney characters to celebrity brands including footballer David Beckham and singer Jennifer Lopez.
Li & Fung is one of the world’s biggest global supply chain management companies.