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Global Brands Group’s North America Business is Headed for New Ownership

After a spin-off from Li & Fung in 2014, Global Brands Group is changing hands again.

Differential Brands Group, which operates brands including Hudson, Robert Graham and SWIMS, said Wednesday that it has entered into a definitive deal to acquire a “significant part” of Global Brands Group’s (GBG) North American licensing business for $1.38 billion.

The move will mean GBG’s brands, including Disney, Star Wars, Calvin Klein, Under Armour, Tommy Hilfiger, BCBG, Bebe, Joe’s, Buffalo David Bitton, Frye, Michael Kors, Cole Haan and Kenneth Cole, will be operated by Differential Brands Group. All of GBG’s North American kids business, all of its North American accessories business, and the bulk of its West Coast and Canadian fashion businesses will now full under Differential Brands Group. After the transaction is complete, GBG’s remaining business will consist of all of its footwear business, all of its New York fashion business, all of its European and Asian businesses and all of its Global Brand Management business.

Though the Fung family had split GBG off into a separate entity, the family still retained ownership of the business.

“I am thrilled that we were able to structure a transaction with the Fung family to acquire one of the leading branded consumer soft goods companies in North America…,” Differential Brands Group board chairman William Sweedler said in a statement. The transaction, Sweedler added, “will transform Differential into a large scale North America branded platform.”

GBG said it made the decision to sell its North American licensing arm to “right size the company’s widespread product and brand portfolio” for a more focused operation, to improve operational efficiency and to allow it to pay down some existing debt.

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The combined platform, according to Jason Rabin, current president of GBG North America, will leverage each company’s “expansive infrastructure, distribution and sourcing networks” to help fuel growth.

“We are proud of what we have accomplished since joining Li & Fung in 2009, judiciously expanding the GBG platform and driving profitability…” Rabin said.

Once the deal is closed—which is expected in the third quarter of this year—Differential Brands Group is expected to have upward of $2.3 billion in annual revenue from branded men’s, women’s and kid’s apparel, plus accessories, which will be distributed to a diversified consumer base across all retail and digital channels.

Releasing its financials in line with the sell-off announcement, GBG reported revenue for the year ended March 31 up 3.4% to $4.02 billion, and a net loss of $887 million, compared to a net profit of $95 million at the same point in 2017.

“Over the past few years, the Group has established significant levels of debt due to carryover from our spinoff from Li & Fung in 2014, and from our expansion and growth as a Group subsequently,” GBG CEO and vice chairman Bruce Rockowitz said in the company’s financial statement. “We are committed to improving our balance sheet, and as stated in our profit warning issued in May, we have been conducting a strategic review on the Group to determine how best to move forward in order to improve shareholder value. We concluded that there is an opportunity for us to renew the focus of our business, and to concentrate on where we not only have competitive advantage, but where we see the strongest growth potential.”