Markets: Retail Giant Authentic Brands Scraps IPO Plans
Authentic Brands Group, a New York-based retail conglomerate, has suspended its plans for an initial public offering (IPO) after already filing an S-1 document with the US SEC. The company has instead opted to raise private funding to fund expansion in the main time.
- Authentic Brands Group’s portfolio retail brands include apparel retailer Forever21, men’s suit maker Brooks Brothers, and department store chain Barneys New York. The company is akin to an old people’s home where once-vibrant retail brands go to stay after they’ve gone past their peak. Authentic buys these befallen retail companies and makes money from what’s left of them through licensing deals.
Over the years, Authentic has relied on hefty venture funding to assemble its constellation of old-guard brands. An IPO was supposed to raise even more money for expansion but has been set aside in favor of private funding.
Authentic is rather selling equity stakes to private equity firm CVC Capital and hedge fund HPS Investment Partners (HPS) for hard cash. The exact amount of equity to be sold is undisclosed, but it’ll value the retail giant at $12.7bn (including debt), it said. This compares to a $4bn valuation when it last raised funding in 2019.
The fresh cash Authentic is raising is vital to an acquisition that’ll considerably prop up the company’s business; it is acquiring the Reebok sportswear brand from Adidas for the sum of $2.5bn. The fundraising is expected to close this December and the acquisition by January 2022.
- In its S-1 filing, Authentic Brands reported a net income of $211mn on $489mn in revenue in 2020, a 43% net profit margin, which is unspeakable in the typical retail industry. Authentic can maintain such high margins as licensing accounts for all its revenue without any company-owned stores.
In a CNBC interview, Authentic Brand’s CEO, Jamie Salter, said the company will target an IPO in 2023 or 2024. He has signed on to be CEO for another five years to guide its growth. That’s not bad for a company founded in 2010.
“The IPO climate is ridiculous,” Salter said. “I think we would have gotten a massive valuation … maybe even more than what we sold the business for. But guess what? I’d rather be private.”