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ABG and Simon Make $305M Bid for Brooks Brothers

Brand management firm Authentic Brands Group and mall operator Simon Property Group submitted a $305 million stalking-horse bid for bankrupt Brooks Brothers.

The stalking-horse bidder sets the low end of the bidding range, which will help Brooks Brothers avoid getting bids below that.

Court papers filed Thursday indicate that Authentic Brands Group (ABG) and Simon made their offer under their SPARC LLC venture. SPARC, a full-service retail operator, supports more than 2,600 retail doors and shop-in-shops across the globe that operate under the retail nameplates Aéropostale and Nautica. It acquired bankrupt chain Forever 21 earlier this year, and is also the stalking-horse bidder for bankrupt Lucky Brand Dungarees.

Brooks filed for Chapter 11 protection on July 8 and outlined plans to shutter 51 stores. At the time of the filing, the retailer operated more than 500 locations worldwide, including roughly 250 in North America. A SPARC ownership would see at least 125 Brooks Brothers stores remain open. In past deals, the retail operator has kept more than half of the distressed company’s retail doors opened upon acquisition.

As part of its efforts to keep Brooks alive, SPARC also provided $80 million in debtor-in-possession financing for the men’s clothier, beating out WHP Global by offering $5 million more in financing and providing better terms via an interest-free loan. And it’s the DIP financing that gives ABG its advantage. SPARC, which has what is called a perfected security interest in Brooks’ assets, can use the $80 million as a credit bid as part of any overall offer. The credit bid is essentially an offset to the full amount that’s on the table. Separately, Simon has also sued Brooks for $8.7 million in unpaid rent.

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Court papers said the $305 million bid includes some adjustments, like an additional amount for inventory adjustment and the subtraction of a credit bid. A bankruptcy court hearing slated for Aug. 3 is expected to approve SPARC as the stalking-horse bidder. Because the SPARC offer sets the base amount for subsequent bids at the auction, SPARC is also entitled to nearly $9.2 million, or 3 percent of the stalking-horse bid and up to $1 million as an expense reimbursement for due diligence, a sort of ‘break-up fee’ under certain conditions if Brooks is ultimately sold to a different buyer. The bidding procedures also require that contender trying to outshine SPARC must bid a minimum of $1 million above the $305 million offered.

Other bidders expected to surface at the scheduled Aug. 5 auction include WHP Global and Milan-based Giglio Group SpA, which is said to be joining forces with other investors that include Club Deal 8.

Brooks is currently owned by Italian businessman Claudio Del Vecchio, son of Luxottica founder Leonardo Del Vecchio. Claudio Del Vecchio acquired Brooks from Marks & Spencer in 2001 through a company called Retail Brand Alliance, a private firm that has since been renamed The Brooks Brothers Group.