Delta Apparel Sells Junkfood Clothing
Twelve years after buying Los Angeles–based Junkfood Clothing Co. for more than $22.5 million, Delta Apparel is selling the T-shirt brand for about $28 million to JMJD Ventures.
The sale includes $25 million in cash at closing, with promissory note payments due between June 30, 2017, and March 30, 2018, for the remaining amount. The transaction does not include the sale of accounts receivable and certain other assets, or the assumption of trade payable and certain other liabilities.
The $35 million total value of the company sold represents about 80 percent of Junkfood’s revenue, or about $43 million. “The Junkfood brand has broadened its consumer reach and awareness, and more than doubled its revenue since we acquired it in 2005,” said Robert Humphreys, the chairman and chief executive of Delta Apparel, based in Greenville, S.C. “While we have enjoyed nurturing this brand over the years, the changing retail environment has made it more challenging to be a niche player in the licensed-graphics space. We are pleased to have the opportunity to sell Junkfood and further reduce our reliance on licensed properties. We expect to use the proceeds from the sale to lower our debt levels, continue our share repurchase program and provide capital for further investments in strategic growth opportunities, including the Salt Life brand and [virtual art studio] Art Gun.”
Net of selling expenses, Delta Apparel expects to realize a pre-tax gain of approximately $1 million on the sale.
Junkfood Clothing was started in 1998 by designers Natalie Grof and Blaine Halvorson, whose Liquid Blaino Designs did business as Junkfood Clothing, a T-shirt line started with nostalgic licenses such as Twister, Candy Land and My Little Pony. In recent years, Junkfood Clothing has acquired licenses
At the time of the purchase in fiscal 2005, Junkfood Clothing had sales of approximately $27 million. Delta Apparel bought Junkfood with $20 million in cash, a $2.5 million seller promissory note and contingent payments with respect to each of the four fiscal years following closing, payable if certain performance targets were met.
Delta Apparel makes a variety of casual and athletic tops and bottoms, embellished and unembellished T-shirts and fleece products. In fiscal 2016, the company had a net profit of $9 million on $425 million in revenues.