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FIFTH & PACIFIC COMPANIES, INC. ANNOUNCES AGREEMENT TO SELL THE INTELLECTUAL PROPERTY OF JUICY COUTURE TO AUTHENTIC BRANDS GROUP FOR $195 MILLION IN CASH

Juicy ... Sold! - juicy

  • “[FNP] today announced that it has entered into a definitive agreement to sell the intellectual property of the Juicy Couture brand. Consummation of this transaction is subject to customary closing conditions and is expected to occur in November.”
  • “William L. McComb, Chief Executive Officer of Fifth & Pacific Companies, Inc., said: ‘We announced that we have signed an agreement to sell the intellectual property of the Juicy Couture brand to Authentic Brands Group (ABG) for $195 million, payable in cash. With this sale, we have also entered into a short-term licensing agreement with Authentic Brands Group that allows us to transition the business in an orderly fashion through the first half of 2014, with a $10 million guaranteed minimum royalty payable to Authentic Brands Group. In the coming weeks and months, we anticipate that Authentic Brands Group will announce licensees and affiliates that will work to take over elements of the operating business, including many of the company's talented associates, retail stores, wholesale, international, and certain components of the ecommerce site. We plan to work closely with these entities to ensure a smooth and orderly transition that is seamless to consumers and our business partners.’”

Takeaway: What’s interesting is that the sale is for ‘intellectual property.’ This sticks FNP with the leases – which it would have to terminate as a cost – as well as the employees (who are likely out of a job). Our model originally called for $250mm in proceeds. But after the deal fell through three weeks ago (for Juicy, Lucky, and the JOEZ deal – all in the same week), our expectations came down to a degree.

Assuming that – worst case – they net $150mm, it still allows them to pay off a third of their debt – and that’s before they sell Lucky, which should net $400mm or better.

(Editor's note: This is a complimentary research excerpt from Hedgeye Retail Sector Head Brian McGough. For more information on how you can subscribe to Hedgeye research click here.)