The consolidation of the fashion industry under Authentic Brands Group continues with Los Angeles denim brand Guess Inc. the latest to sell off a stake in its business.
Authentic Brands, which owns more than 50 brands, isn’t buying Guess entirely. Instead, the New York brand management firm will pay $16.75 per share for a 51 percent stake in Guess’ intellectual property, according to an announcement on the deal made Wednesday. The operating company, which includes over 1,000 Guess Inc.-owned stores, will remain under the ownership of Guess founders Maurice Marciano and Paul Marciano, along with Paul’s son Nicolai Marciano and CEO Carlos Alberini.
The deal values Guess at about $1.4 billion and reflects a 73 percent premium from where the stock was March 14, the last day of trading before WHP Global submitted its offer to pay $13 per share for Guess Inc.
The payout of the Authentic Brands purchase will be to shareholders and will not include the three Marcianos and Alberini, who will roll over their equity to help finance the transaction.
“Guess has always worked to create a strong network of licensing partners and joining forces with Authentic – the world’s second largest licensor with a powerful lifestyle and entertainment platform – will enable us to build on this foundation and expand our reach as a global lifestyle brand,” Paul said in a statement.
Guess to Go Private
Tariffs, shifting shopping habits and other headwinds may have factored into the decision. The deal will take Guess private and away from the scrutiny of Wall Street as it looks to grow its more sustainable, Gen Z-focused Guess Jeans brand and Rag & Bone.
Guess and WHP went in on a deal to buy New York-based Rag & Bone last April, with the contemporary brand’s impact on the overall business almost immediate post-sale. Much of the growth and future growth is being driven by Rag & Bone with a full understanding of its potential unknown given the large runway it has for category expansion through licensing.
Up until this point, Guess Inc. appeared to be carving a path of its own as a powerful backend base for a platform of brands, with Guess Jeans and Rag & Bone seemingly just the beginning.
Guess has long proven its expertise in licensing, which is how it’s managed to scale its namesake business, in addition to the Marciano label.
“As a private company benefiting from the perspectives of a globally recognized licensing partner, Guess will have enhanced flexibility to navigate today’s complex operating environment and execute on a more targeted, long-term strategy, enabling us to even better serve customers around the world,” Alberini said in a statement.
The Marcianos and Alberini are expected to continue at the helm of the business, handling the day to day.
Authentic’s purchase is expected to close by the fiscal fourth quarter, which ends in February.
Shares of Guess surged in pre-market trading Wednesday, up as much as 26 percent on the news to $16.74. The denim firm had a recent market cap of $694 million.
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