Authentic Brands Group withstood a flurry of last-minute scrambling by rivals who failed to come up with a winning bid to buy embattled luxury retailer Barneys.
Jamie Salter, ABG CEO, confirmed Thursday that the company had won the bidding for Barneys, and that Monday’s auction has been canceled.
The $271.4 million deal is subject to approval by the bankruptcy court next Thursday before the brand management firm, parent to Juicy Couture, Frye and Aeropostale, among others, can officially close on the transaction, ending a headline-grabbing saga in Barneys’ complicated history.
ABG gathered a group of partners instrumental in forging the winning deal, including B. Riley Financial, a lender in the bankruptcy case, and Hudson’s Bay’s Saks Fifth Avenue, which could potentially license the Barneys name for a cadre of shop-in-shops hosted in some of the department store chain’s locations.
For now, the fate of Barneys’ stores hangs in the balance.
Unless ABG successfully renegotiates new—and presumably, lower—leases with landlord Ashkenazy Acquisition, which raised the rent on the 660 Madison Ave. flagship from $16 million to $32 million in January, there’s a chance all Barneys stores could disappear, ending a memorable era in fashion that saw sartorial shutterbug Bill Cunningham virtually pioneer the street-style scene.
If the court greenlights ABG’s stalking-horse bid, the brand management firm would commence liquidating Barneys inventory and winding down stores, putting 800 jobs at risk. Stores could re-open with new inventory if leases are renegotiated quickly, potentially softening the unemployment blow.
Sam Ben-Avraham, whose consortium had raised a bid that failed to supplant ABG’s, hammered home this concern about jobs. Over the weekend, the fashion trade show mogul and Kith investor penned an open letter at savebarneysny.com outlining his consortium’s plans, provided they win.
“We can do better for the broader community of fashion designers, creative professionals and employees. We have a solution that doesn’t involve mass layoffs and store closures,” the letter noted.
Despite ABG’s self-declared status as the “winner” in the ongoing Barneys drama, industry rumblings indicate that Ben-Avraham is still trying to cobble together the financing to make a last-ditch play for Barneys before Thursday’s court hearing.
The Ben-Avraham-led consortium is believed to have submitted an offer prior to the Wednesday deadline, but its entry was never classified as a qualified bid—which is required in order to usurp Authentic Brands’ pace-setting offer. The new bid, at a reported $260 million, represented a $40-million increase over the group’s initial offer, and it doesn’t cover the $8.1 million break-up fee required in the stalking-horse agreement.
Given that Ben-Avraham’s offer is far lower than the $279.5 million-plus needed to top the Authentic Brands offer, it’s little surprise that Monday’s planned auction was canceled.
Footwear creative guru Steve Madden had reportedly been trying to patch together financing for a bid, while David Jackson, former CEO of Istithmar World, has also been said to have had his eye on a Barneys bid–provided he, too, could scrape together the funds.
The Dubai-based group’s history precedes the Great Recession. Istithmar World acquired Barneys from Jones New York in September 2007 for $942.3 million, but Dubai’s financial issues a few years later forced the luxury retailer’s sale. The Istithmar plan, which Jackson spearheaded, included a global expansion in Asia, Europe and across the U.S.
But both Madden and Jackson were too late to the game, and likely lacked the time needed to get financing partners on board.
Richard Perry acquired Barneys in a debt-for-equity deal back in May 2011, with his hedge fund Perry Capital as the majority owner and Ronald Burkle’s The Yucaipa Cos. taking a minority stake. Perry has since shut down his hedge fund, but kept Barneys as a personal holding.
At the time Barneys filed its voluntary bankruptcy petition on Aug. 6, Perry and Burkle still retained stakes in the company. Burkle is believed to be part of Ben-Avraham’s consortium group, which also includes Intermix founder Khajak Keledjian and Theory co-founder Andrew Rosen.