Apax Partners-backed Tommy Hilfiger may IPO in New York instead of on Euronext, the New York Post reported today. This is an interesting tale of brand equity, which is basically what buyout shops pay premiums for when they invest in consumer spending-reliant businesses. (Unless it’s a retailer that owns its own stores and real estate, there is rarely much in the way of physical assets to back an LBO shop’s investment—the value is in branding and intellectual property.)
When Apax bought the apparel maker in 2006 for over $1 billion, Tommy Hilfiger’s cachet as “high end” had completely eroded in the U.S. Apax pulled the brand from most U.S. stores, and for the past two years, has had incredible success taking Tommy Hilfiger global. This week the business reported a year over year increase in annual EBITDA by more than 20% for 2007.
I’m impressed, because how many firms buy a business with the intention of “expanding internationally” and then actually do it with success? But the real challenge is still to come for Apax—Tommy Hilfiger is planning a new launch at Macy’s stores in the U.S. and may expand to more high-end locations. If the brand is accepted by upscale (or even middle-of-the-road) U.S. consumers, this may be one of the largest brand revitalizations I’ve seen. Possibly inspiration for Jordache denim, another once-popular U.S.-born brand kept alive by overseas popularity. Jordache Enterprises is privately owned, to my knowledge.
What are some other successful PE-backed brand revitalizations in apparel, or consumer products? Certainly not FILA, previously owned by Cerberus Capital Management. The brand seems to have disappeared from most markets to focus on South Korea. (In fact, its current owner has publicly blamed Cerberus for its waning success in the West). Cerberus sold it in an MBO last year to its Korean counterpart for $100 million more than it paid. Here’s an in-depth look at that situation the latest edition of Forbes.
Certainly I’ll be closely watching Sun Capital’s investment in Kellwood Company, a company with a few stale brands in need of revitalization, disposal or phasing out.