Lynn Tilton of Patriarch Partners has been all over the news lately. Her distressed buyout firm recently gave up on a battle to purchase Polaroid, bought the assets of Stila Cosmetics and became embroiled in a conflict over the shares of AriZona Iced Tea.
Today Patriarch purchased Spiegel Brands, an online and catalog retailer selling apparel under the Spiegel, Newport News and Shape fx brands. The deal’s timing is uncanny, considering the company’s former sister business, Eddie Bauer, collapsed into bankruptcy just yesterday. Tilton said Patriarch isn’t likely to place a rival stalking horse bid on Eddie Bauer, which has agreed to be acquired by CCMP Capital for $202 million, because it’s too retail-oriented for the firm’s taste.
Spiegel approached Patriarch, actually, because its lender, Wells Fargo, wanted to exit the credit. Spiegel was owned by buyout firm Granite Creek Partners. As is typical in 90% of Patriarch Partners’ deals, the firm purchased the assets of the business with a separate entity, allowing the creditors to force the existing entity into foreclosure.
The firm intends to emphasize the business’s e-commerce business, which makes up around 65% of sales, Tilton said. “The catalog business has already been scaled back, and we would prefer it to be more of an online business, but we have no immediate intention of discounting catalogs altogether,” she said. The firm also plans to cross-sell products from other portfolio companies on the Spiegel website, such as eyewear maker 180s, Stila Cosmetics, and house wares maker Croscill.
Patriarch purchased Spiegel with cash from its third fund, Zohar III, a $1.2 billion pool that’s around 80% invested, she said. The firm will probably return to market with a new fund in September of this year, she said.
Patriarch was in the news today for more than just the Spiegel deal. Japanese creditors forced Stila Corp., the former holding company for Stila Cosmetics, into involuntary bankruptcy. Patriarch Partners purchased Stila Cosmetics from Sun Capital earlier this year in a transaction where creditors foreclosed on Sun’s holding company for Stila. The deal allowed Patriarch to purchase the assets through a new holding company, Stila Styles.
Tilton said Stila Cosmetics, which sells its products in specialty stores like Sephora, has been profitable “out of the box.” The firm is focusing on more direct-to-consumer sales initiatives, she said.
Patriarch made headlines in April when it became embroiled in an existing conflict between the founders of AriZona Iced Tea. Patriarch owns a 2.5% stake in the business with the option to increase it to 22.5%. Tilton purchased the stake from co-founder John Farolito, who she called a “close friend.” Farolito’s co-founder Don Vultaggio has issued a legal challenge over the stake sale, claiming Farolito needed his blessing before selling any piece of the business.
“We’re in some ways being a white knight to help them settle (their conflict),” she said. However, Patriarch would not purchase the entire company given the chance because it is not distressed, she said.