According to Vince Holding, the transaction closed on Sunday, funded with cash from an existing $80 million credit facility boosted to $100 million at the same time of the purchase. The contemporary apparel and accessories company said no covenants were associated in connection with the increase of the revolving credit facility.
The purchase price was the equivalent of a $19.2 million payoff of the debt obligations owed under the credit facility used by the acquired brands, along with $500,000 in compensation expense. At the close, Vince received the assets of the two brands, which included $700,000 in cash.
Vince said the acquisition is expected to be dilutive to fiscal 2019 earnings.
Sun Capital Partners emerged as a common denominator in the deal, which transfers the two fashion brands off Sun’s operations and onto Vince’s. The transaction is considered one between commonly controlled entities.
The Boca Raton-based private equity firm, which owned the two brands, also holds the majority stake in Vince. Sun secured ownership of Vince when it acquired apparel firm Kellwood Co. in 2008 in a deal valued at $762 million. Whatever Sun lost on that deal it gained back via a spin-off of Vince when it completed the brand’s initial public offering in November 2013.
Rebecca Taylor became part of Kellwood’s operating portfolio in 2011 and Parker followed in 2014. Sun sold Kellwood in December 2016 to an unnamed Hong Kong investor for an undisclosed amount. Rebecca Taylor and Parker were not part of that transaction and remained affiliates of Sun Capital. Founding designer Rebecca Taylor left her namesake brand in August of last year.
“We are excited to be creating a diversified portfolio of highly recognized and distinct contemporary brands with this acquisition,” Vince CEO Brendan Hoffman said. “The addition of Rebecca Taylor and Parker will position us to gain broad appeal across the contemporary spectrum.”
The three brands each target a different contemporary customer, and combined net sales for Rebecca Taylor and Parker totaled $84 million for the 12 months ended Feb. 2, 2019.
“We see opportunity to accelerate growth in each of these brands by implementing the Vince strategic playbook to build direct-to-consumer strategies, further expand brand awareness, and leverage core competencies through the sharing of best practices,” Hoffman added.
Vince could double its revenue over time from prior fiscal 2019 revenue guidance of between $295 million to $305 million. That could be achieved by accelerating Rebecca Taylor’s direct-to-consumer business, expanding internationally, and growing the apparel rental business, Rebecca Taylor RNTD.
Adding new retail doors in the U.S., nurturing new licensing partnerships and expanding a modest international footprint could foster growth at Vince.
Vince did not rule out the possibility of future acquisitions to drive growth at the firm.
The deal, and even future acquisitions, mark a change in fortunes for the firm. Back in July 2017, as Vince was dealing with product misses, a bloated store fleet and evolving consumer shopping habits, financial pressures forced the firm to lean on sister brand Rebecca Taylor to aid as back-up with purchase-order financing in case of liquidity constraints.
It was an arrangement that worked because of the sibling relationship through Sun Capital.
These days, Vince is in far better financial shape. Sales for the current fiscal year are projected at $295 million to $305 million, up from $279 million in 2018. For its second quarter ended Aug. 3, Vince posted earnings of $1 million, or 8 cents a diluted share, versus a loss of $3.8 million, or 33 cents, in the same year-ago quarter. And net sales rose 13 percent to $71.4 million. Its gross margin rate rose 480 basis points to 48.7 percent.