Brooks Brothers: Bidding War Brewing
While Authentic Brands Group and Simon appear to be the stalking-horse bidder, others are lining up to make an offer for the 202-year-old retailer.
Claudio Del Vecchio tried for several years to sell Brooks Brothers, but no one seemed to want to buy it — at least for a good price.
But now the bankrupt retailer has a slew of suitors.
As reported, Brooks Brothers revealed that it filed a motion in the United
States Bankruptcy Court for the District of Delaware to obtain court approval of an asset purchase agreement with Sparc Group LLC, a company backed by Authentic Brands Group with its partner Simon Property Group. Sparc has placed a $305 million offer to purchase substantially all of Brooks Brothers’ global business operations as a going concern and includes a commitment to
acquire at least 125 of the company’s retail locations. A court hearing to approve the stalking-horse bid will take place on Aug. 3.
ABG’s founder Jamie Salter has some competition, however, in what could turn out to be a bidding war when offers are due Aug. 4. Brooks Brothers is requesting that the deadline for competing offers be set for Aug. 5 and that a hearing to approve the sale take place on Aug. 11.
First, there is Club Deal 8, or CD8, the Italian company which, according to sources here, is determined to make a bid.
As reported, Italian entrepreneur
Luciano Donatelli, who founded LD Consulting firm, has been leading a group of investors interested in buying the venerable retailer under the Club Deal 8 moniker.
This includes Alessandro Giglio, president of online retailer Giglio Group; the Biellabased Gruppo Verzoletto; entrepreneur and environmentalist Brando Crespi, founder of Pro-Natura, which supports and funds sustainable projects; legal manager Lorenza Morello, and Studio Dentons as an adviser.
Sources say the offer will stand on three pillars: sustainability; a lower number of stores compared to the 125 proposed by Authentic Brands Group, which, as reported has stepped forward with a $305 million stalking-horse bid to purchase Brooks Brothers, and a greater emphasis on the online channel — hence the partnership with Giglio Group.
Club Deal 8 is also said to be keen to protect the relationship with established customers while growing its business with Millennials.
If Club Deal 8 succeeds in taking control of Brooks Brothers, the goal, as reported, is to reach sales of $3 billion in five years and grow production sixfold. Donatelli sees sales of about $1.2 billion to be derived from the Americas; $1.2 billion from the Far East, and $600,000 from Europe and Russia.
In addition to Sparc and Club Deal 8, WHP Global, the brand management firm that has so far purchased Anne Klein and Joseph Abboud, is also still hot on owning Brooks Brothers.
Last week Yehuda Shmidman, chairman and chief executive officer of WHP, told WWD: “It’s early innings in the Brooks Brothers bankruptcy sale process. The next key date is the auction. Our company, WHP Global, backed by Oaktree Capital and BlackRock, is a bidder. We are big believers in the power of the Brooks Brothers brand, the global footprint and the management team. We’re looking forward to competing at the auction — that’s when the future of Brooks Brothers will be determined.”
WHP had initially agreed to provide Brooks Brothers with debtor-in-possession financing when the company filed Chapter 11 in early July, effectively positioning itself as the unofficial stalking horse. But a few days later, ABG and Simon swooped in with a slightly larger DIP package, elbowing WHP into the back seat.
Meanwhile, Brooks Brothers’ bankruptcy process rolls on. In court proceedings in Delaware, Brooks Brothers’ landlords are opposing the retailer’s efforts to defer rent payments during the bankruptcy.
The company had moved to defer rent payments earlier this month, as a number of other retailers that filed for Chapter 11 during the COVID-19 pandemic already have. Brooks Brothers cited the effects of pandemic-related shutdowns on its sales, and sought a 60-day deferral of the roughly $7.2 million in monthly payments it owes on some 207 leases.
Companies in bankruptcy are generally required to pay their bills during the Chapter 11 process, but a feature of the bankruptcy code may allow such a rent deferral under certain circumstances. During the pandemic, bankruptcy courts have been inclined to grant such deferrals, and have done so in the ongoing bankruptcies of J. Crew Group and J.C. Penney Co. Inc.
Brooks Brothers has argued in court filings that the pandemic led it to furlough 2,900 employees, cut salaries and temporarily close stores, and imposed significant financial strain. The company projects its July revenues to be in the range of $ 9.6 million, and its operating disbursements to be roughly $ 14 million, according to a monthly operating report filed Thursday.
“The debtors, for their part, accordingly closed their retail and factory outlet stores worldwide — not only to comply with governmental health directives and guidelines, but also as an adjustment to the practical reality that, up until very recently, retail customers simply could not visit the debtors’ stores,” Brooks Brothers said in a filing this month.
A number of landlords have objected, including the Taubman landlords, who asked that the court offer them more protection in the case.
“The Taubman landlords understand the current complications faced by the debtors, however, the Taubman landlords are owed delinquent rent and will continue to have to expend funds related to debtors’ premise regardless of whether debtor timely pays rent to the Taubman landlord,” they said in their filing on Thursday.
A hearing on the issue is scheduled for July 30. A representative for Brooks Brothers declined to comment.