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Iconix Brand Group Inks Deal to Sell Umbro China for $62.5M

Iconix Brand Group inked a deal to sell Umbro China for $62.5 million.

According to a Securities and Exchange Commission (SEC) regulatory filing Wednesday, the owner of brands including Mossimo, Rocawear and Ed Hardy reported its plans to sell all equity interests in the sports-centric label’s China business.

The sale of Umbro China, a subsidiary of Iconix Luxembourg Holdings, to HK Qiaodan Investment Ltd. is expected to close around Sept. 15, 2020. The agreement includes the rights to sell the sports brand in the People’s Republic of China, Hong Kong, Taiwan and Macau, as well as the customary warranties and representations.

Net proceeds from the sale, the New York-based brand management firm said, will be used to repay amounts due under existing financial arrangements and for general corporate purposes.

Iconix paid Nike $225 million in October of 2012 to acquire the British soccer brand, which is now sold in more than 120 countries. Founded by brothers Harold and Wallace Humphreys in 1924, Umbro gets its name from a combination of the “um” from their surname and the “bro” from “brothers.” Iconix still retains ownership of the Umbro brand, excluding the planned deal for Umbro China.

For the fourth quarter ended Dec. 31, Iconix’ net loss widened to $95.0 million, or $8.11 a diluted share, on licensing revenue of $43.2 million. That’s compared with the year-ago quarter that saw a net loss of $69.1 million, or $9.04, on licensing revenues of $42.7 million.

The company is often referred to as the grand-daddy of the brand management model, with its roots as the footwear brand Candie’s before transforming to a licensed brand concept. The model proved such a success that it spawned a rash of copycats mimicking its operating structure, although each has put its own spin on the business.

Iconix Brand Group inks a deal to sell its entire equity interest in its Umbro China business for $62.5 million to a Hong Kong firm.
A look at some women’s T-shirts from Umbro. Shutterstock

Iconix, however, has run into some operational hurdles over the past two years, including accounting fraud charges leveled at company founder Neil Cole. In December, the company agreed to pay $5.5 million in civil penalties to resolve outstanding SEC claims over certain accounting irregularities involving former executives at the company. Iconix has neither admitted nor denied the SEC’s allegations in resolving the commission’s claims.

Shares of Iconix are currently trading in the 92-cents range on the NasdaqGS exchange. The brand group carries more than $650 million in debt, but its share price on Wednesday puts its market capitalization at just $10.9 million. The 52-week high for shares of Iconix was $2.75 and the low at 51 cents.