Leonard Green has agreed to buy Fifth & Pacific Companies Inc (NYSE:FNP)’s Lucky Brand Jeans division for $225 million. The deal was announced by the companies earlier today. The sale of Lucky Brand Jeans represents yet another step in Fifth & Pacific Companies’ move to divest assets and focus on its flagship Kate Spade line.
Current Lucky Brand Jeans operations
Los Angeles-based Lucky Brand is helmed by CEO David DeMattei, who was hired from Williams-Sonoma, Inc. (NYSE:WSM) in January 2010.
Fifth & Pacific Companies Inc (NYSE:FNP), formerly Liz Claiborne Inc., owned 239 Lucky Brand stores as of the end of September. Lucky Brand reported sales of $346.4 million and $14.3 million earnings before interest, taxes, depreciation and amortization for the year through Sept. The brand accounted for 29% of Fifth & Pacific’s sales during the first three quarters, with the Kate Spade line ringing up 41% of sales.
A revamped Fifth & Pacific
Fifth & Pacific Companies Inc (NYSE:FNP) CEO William McComb came to the job in 2006 with a mission to divest assets and focus the company, and he has done just that. In his seven year tenure, he has cut the business portfolio from over 30 brands to just two — Kate Spade and the jewelry-focused Adelington Design Group. Wall Street has also started to appreciate MCComb’s efforts to improve the bottom line, as the price of the equity has doubled over the last 12 months.
Relative deal valuation
According to Bloomberg’s Matt Townsend, the $225 million price paid by Leonard Green represents a multiple of more than seven times the trailing 12-month adjusted EBITDA.
When reviewing 195 pending or finalized purchases of U.S. apparel manufacturers and retailers over the last five years, purchasers paid a median price of 11.3 times unadjusted EBITDA, according to data compiled by Bloomberg.