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American brand management company, Authentic Brands Group has made a U-turn on its proposed Initial Public Offering (IPO) and is now favoring dealings with private equity investors.
As reported by CNBC, the retail conglomerate plans to sell private shares worth $12.7 billion to CVC Capital, hedge fund HPS Investment Partners, and a pool of existing stakeholders. While the New York-based retailer is pausing its public debut plans after filing an application with the United States Securities and Exchange Commission (SEC) back in July, the company has confirmed it won’t be revisiting the IPO plans until about 2023 or 2024. Had the IPO been floated, Authentic Brands would have increased its valuation to about $10 billion.
“The IPO climate is ridiculous,” said Authentic Brands Chief Executive Jamie Salter in a phone interview. “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.”
Salter said he has signed up to be the company’s CEO for the next five years, a timeline in which it hoped to make further acquisitions and power business expansions, events that will start becoming visible by year-end.
Authentic Brands Group has a number of affiliated entities including apparel retailers Forever 21 and Aeropostale, American sports magazine, Sports Illustrated, and Nautica, an apparel brand featuring primarily men’s, women’s, children’s apparel and accessories, as well as home, watches, and fragrance. Authentic Brands Group is on the verge of closing a $2.5 billion Reebok acquisition deal by the end of the year. Reebok is a sports accessories manufacturer with a unique focus on footwear. The firm’s acquisition will help bolster the Authentic Brands Group portfolio.
Crucial Timelines for Authentic Brands Pursuit
The private funding round from CVC Capital and HPS Investments is billed to close by December. Both companies will be taking a seat at the board of the Brand Management Company.
“We plan to work closely with the ABG team to execute on their strategic priorities, particularly around international expansion,” said Chis Baldwin, a managing partner at CVC.
Authentic Brands is currently owned by American multinational investment management, BlackRock Inc (NYSE: BLK), and the firm will maintain its largest shareholding position in the company. The company’s early investors, including US mall owner Simon Property Group Inc (NYSE: SPG), General Atlantic, Leonard Green & Partners, Brookfield Asset Management Inc (TSE: BAM.A), and basketball star Shaquille O’Neal are also expected to hold on to their equity positions.
Despite these acquisition plans, and a growing ownership structure, CEO Salter confirmed that the firm still operates as usual. The company has grown its income from $72.5 million in 2019 to $211 million in 2020, as contained in its earlier filings with the SEC. Authentic Brands Group grew its revenue by 2% to $489 million within the same timeframe.
“We have the same playbook today as we had yesterday,” said Salter. “You’ll hear about more acquisitions by the end of this year.”