- Authentic Brands Group put in the winning bid at Heritage Home's bankruptcy auction for the intellectual property of the Thomasville and Broyhill furniture seller brands, the company said in a press release emailed to Retail Dive. Also included in the sale were Heritage's Drexel and Henredon IP.
- Authentic Brands, which partnered with Jay Schottenstein and his company SB360 Capital Partners on the bid, offered $38.5 million for the IP, according to a court filing. With a $38 million bid, Big Lots was the backup bidder at the auction. (Heritage Home filed for Chapter 11 in late July.)
- ABG said it will take a majority stake in the brand properties as part of its partnership with Schottenstein. The sale is subject to court approval. ABG said it expects the deal to close in the fourth quarter.
ABG has been busy this year, adding to its portfolio — which the company said is worth $9 billion in global retail sales — and stretching its horizons beyond apparel.
The brand developer also just bought Camuto Group's brands, including Vince Camuto, Louise et Cie, Sole Society, CC Corso Como, Enzo Angiolini and others. ABG had a partner in that deal, too: major shoe retailer DSW. The latter took 40% stake (ABG took 60%) in the IP and plans to put up $200 million to take over Camuto's operations.
Moody's analyst Brian Silver said in a client note on the Camuto acquisition, "The transactions will increase ABG's diversification from a licensee perspective, serve as a launchpad for potential future partnerships and/ or distribution arrangements with DSW, and are expected to benefit ABGs free cash flow generation."
Silver added that the partnership with DSW could lead to more collaborations between the two in footwear down the road.
ABG also made a $35 million-plus play for Brookstone's remaining business when it went up for auction this year after the novelty retailer's Chapter 11 filing. ABG ultimately lost that auction, which would have expanded ABG's product scope yet further. (Brookstone instead went to another brand management company, Bluestar Alliance, for more than $65 million.)
Moody's viewed ABG's stalking horse bid for the Heritage Home brands, along with Camuto, as being credit positive in the long run. But he also pointed out that "ABG remains highly leveraged and aggressive with respect to the recent size and pace of acquisitions."
Since the start of the fiscal year, the company has spent more than $500 million in aggregate on its Nine West (which included Bandolino) and Nautica acquisitions, according to Silver. But the analyst also thinks ABG's leverage will improve over the next 12 to 18 months as its profitability grows.
The holding company has a highly profitable model, especially compared to other retailers and product makers. Rather than hold leases and capital on its books, ABG contracts with third parties to operate its brands, making for a lucrative, cash-heavy model based on royalty payments.
The Heritage Home brands sale opens up yet another sector to ABG. It puts the company "firmly in the home furnishings business," ABG CEO Jamie Salter said in a statement. "We've been looking at this sector for several years and the Heritage Home brands deliver against our strategic focus of both growing and diversifying the ABG portfolio."
Correction: An earlier version of this story misstated the name of the partner Authentic Brands worked with on the acquisition. ABG partnered with Jay Schottenstein and his company SB360 Capital Partners.