Even as brick-and-mortar clothing shops wane in popularity compared to e-commerce operations, one retail conglomerate is preparing for an IPO to further its growth. Authentic Brands Group, which owns clothing companies like Forever 21, JCPenney, Eddie Bauer, and now Reebok, has filed its prospectus to go public in the coming months.
Despite the decline of shopping malls, many of the stores founded in the 1980s received new life thanks to Authentic Brands CEO Jamie Salter’s brand and licensing acumen. In addition to its wide array of apparel companies, Authentic Brands owns the licensing rights to multiple high-profile celebrity figures both living and dead. The company is planning to go public on the New York Stock Exchange.
TL;DR
- Jamie Salter founded Authentic Brands Group in 2010 to bring together several apparel retailers under one umbrella.
- ABG owns multiple clothing retailers as well as licensing rights to more than 30 of the most recognizable brands (including legends like Marilyn Monroe).
- The company plans to go public on the NYSE under the ticker symbol AUTH.
- ABG listed $100 million as its IPO size on the prospectus, likely as a placeholder amount for how much they really hope to raise
- The Authentic Brands IPO plans to include two share classes: Class A and Class B.
A brief history of Authentic Brands
The founder, chairman, and chief executive of Authentic Brands Group is Jamie Salter, a longtime leader in the licensing industry.
Early in his career, Salter acquired a snowboard company and later co-founded another snowboard manufacturer, Ride Inc. He also co-founded Hilco Consumer Capital and led it through multiple major acquisitions.
Since Salter founded Authentic Brands in 2010, he has guided the company to be a top licensor of major brands—including living and dead celebs, Sports Illustrated, and a whole slew of apparel companies.
Some of the top clothing retailers that live under the Authentic Brands umbrella today are: Aéropostale, Nautica, Eddie Bauer, Jones New York, Forever 21, Juicy Couture, and Van Heusen.
ABG doesn’t just work exclusively with apparel, however. Under Salter’s guidance, the company has acquired the rights to sell products bearing the names of departed celebrities like Elvis Presley and Marilyn Monroe, as well as living legends like Shaquille O’Neal and “Dr. J” Julius Erving.
In 2016, ABG partnered with mall developers Brookfield Property Partners and Simon Property Group to buy Aéropostale out of bankruptcy. Not long after that, ABG and Simon Property joined forces to create SPARC Group LLC (with the initials SPARC representing Simon Property Authentic Retail Concepts).
In 2020, ABG again worked with Simon Property to rescue Lucky Brand Jeans from Chapter 11 proceedings.
With Salter at the helm, ABG has not rested on its laurels, continuing to make major acquisitions at a rapid rate. In June of this year, ABG and SPARC Group teamed up to acquire Eddie Bauer.
Last month, ABG announced it was acquiring assets held by Collective Licensing International, LLC: Airwalk, Hind, Vision Street Wear, and Above The Rim. Those brands were formerly held by Payless Holdings, which has since gone out of business. Most recently, Adidas sold Reebok to Authentic Brands.
Licensing fees bring in the bulk of the company’s revenue each year.
Authentic Brands fundraising
The company has been funded by a number of private equity investments rather than Series A or similar funding rounds:
- Private equity: In 2010, investors poured $250 million into the new company. Jamie Salter, Knight’s Bridge Capital Partners, and Leonard Green & Partners invested.
- Private equity: In April 2016, Lion Capital invested in Authentic Brands.
- Private equity: General Atlantic invested in ABG in October 2017.
- Private equity: In August 2019, BlackRock’s Long Term Private Capital (LTPC), GIC, and Jasper Ridge Partners invested $875 million in ABG.
Path to the Authentic Brands IPO
Authentic Brands Group launched more than a decade ago when CEO Jamie Salter already had vast experience in brand licensing to help guide the business.
Salter, together with David Simon of Simon Property and SPARC, took advantage of the blow of the COVID-19 pandemic to apparel retailers and acquired several companies out of bankruptcy. As of September 2020, the firm’s roll of acquisitions were to bring annual revenues to $15 billion (and that’s not including all the acquisitions made in 2021).
Although ABG hasn’t set a price range per share or Authentic Brands IPO date, investors expect it will happen soon. Sources say it may be seeking a $10 billion valuation in its IPO, and Renaissance Capital estimates the IPO could raise up to $1.5 billion.
The Authentic Brands Group will go public with an offering of two share classes: Class A common stock will be open to all investors, while Class B shares will be only available to the CEO and his key associates. Class B shares will also come with greater voting power than the Class A shares.
Joint bookrunners on the ABG IPO are BofA Securities, J.P. Morgan, Goldman Sachs, Jefferies, UBS Investment Bank, Wells Fargo Securities, Cowen, Guggenheim Securities, and KeyBanc Capital Markets.
What are the risks and opportunities for ABG investors?
The retail apparel and footwear industry is expected to grow from $1.9 trillion in 2019 to over $3 trillion by 2030. Since Authentic Brands holds a vast array of clothing retailers, it may be poised to perform well in that market.
Besides that, most of its revenue comes from licensing fees, so the company can continue to grow by selling licensed products via e-commerce platforms even if shopping malls and brick-and-mortar locations falter.
Authentic Brands highlights its “asset-light” business model, meaning that it invests more heavily in operations than in capital assets. ABG’s 800+ licensee partners are bound to long-term contracts and hold the brunt of responsibility for selling branded consumer products.
ABG acquired the licensing rights to Shaquille O’Neal merchandise and endorsements in 2015. O’Neal had already focused on attaching his name to affordable products to attract more buyers (for example, Walmart shoes for $20 or less, and jewelry pieces between $100–$500 at Zales).
The company noted that between 2016 and 2020, it increased revenue from $165 million to $489 million, for a compound annual growth rate (CAGR) of 31%. Net income also had a CAGR of 47%, increasing from $45 million to $211 million.
For the 12 months ending March 31, 2021, Authentic Brands booked $529 million in sales. If Salter’s previous statements are an indication, the IPO is a step towards expanding the company to many more brands.
Several of ABG’s acquisitions have prompted criticism. They often lead to massive staff layoffs in the bought-out brands. While some view SPARC as a vehicle to brand redemotions, others say it’s “exploiting their traumas for fast profits in ways that cheapen the brands’ legacies.”
Bottom line
Under the leadership of seasoned brand licensing veteran Salter, the upcoming Authentic Brands IPO could be a great move for the company even as consumers decide whether shopping malls will thrive or die out. Meanwhile, Salter and SPARC may continue to fend off accusations about business ethics as the company becomes publicly traded.