Dive Brief:
- Authentic Brands Group sold "significant" equity stakes to investment firms CVC Capital Partners and HPS Investment Partners. The firms agreed to purchase the equity from current, unspecified shareholders.
- The deal, expected to close in December, values the brand licensing conglomerate at $12.7 billion and leaves BlackRock as its largest shareholder, as the firm has been since 2019, according to a press release.
- With the new investors, Authentic Brands is delaying a planned initial public offering. "We pursued an IPO so that we could bring value to ABG and its shareholders," a company spokesperson said in an email. "We are achieving exactly that with the onboarding of new equity partners."
Dive Insight:
In its IPO filings, Authentic Brands outlined an ambitious imagined path toward growth, whereby the brand owner and manager enters new categories and adds many billions of dollars in revenue as it takes on more, and more varied, intellectual property.
Authentic Brands already owns or co-owns Forever 21, Barneys New York, Nine West, Nautica, Brooks Brothers, Lucky, J.C. Penney and other brands, along with the rights to Elvis Presley, Muhammad Ali and other celebrity names, as well as the sports media giant Sports Illustrated.
It also agreed to buy Reebok earlier this year for $2.5 billion, a deal that the company expects to close in next year's first quarter and bring its portfolio to $20 billion in retail sales.
Continued growth appears to be top of mind for the company even as it scraps an IPO tied to future growth. "We are primed to continue furthering our global presence, acquiring new entertainment and lifestyle brands and driving organic growth for our portfolio," Nick Woodhouse, president and chief marketing officer for Authentic Brands Group, said in a statement.
Authentic Brands CEO Jamie Salter told CNBC that the company could have gotten a "massive valuation" on the public markets if it had gone ahead with its IPO. "But guess what? I'd rather be private," Salter said.
CNBC reported, and a company spokesperson confirmed, that Salter recently signed to stay on as CEO at Authentic for another five years.
The company has been an attractive vehicle for investors to date. While it has a large chunk of debt on its books, which has helped fuel its massive expansion, its margins are huge — 70% on its adjusted EBITDA, according to its IPO prospectus.
That is in large part because the company has few assets and does little capital spending. It doesn't operate stores or make products. Third-party partners carry out all the operating activities of the brands Authentic owns, even product design.
As Salter himself put it in a letter to potential investors: "We are brand owners, curators and guardians. We don't manage stores, inventory, or supply chains. We don't manufacture anything. We are a licensing business and are purely focused on brand identity and marketing."
Its change of plans puts Authentic Brands in a position to keep growing and buying IP without the pressures and scrutiny of quarterly reporting. To the company, there is a $13 trillion market in branded commerce up for grabs. Authentic has said it could enter consumer electronics, alcoholic beverages and other consumer categories in the future.
