LA's Differential Brands to Acquire Majority of Global Brands’ North American Division

As of Thursday, June 28, 2018

Differential Brands, the Los Angeles apparel company whose labels include Hudson and Robert Graham, announced it is buying a significant share of Global Brands Group’s licensing business in North America.

The deal is valued at $1.38 billion and should close some time in the third quarter, Differential Brands said. The purchase price will be paid in cash.

The brands that make up the North American licenses include Calvin Klein, Under Armour, Tommy Hilfiger, BCBG, Bebe, Joe’s, Buffalo David Bitton, Frye, Michael Kors, Cole Haan, Kenneth Cole, Disney and Star Wars.

Once the deal is completed, Differential Brands will have an annual revenue of more than $2.3 billion, making it one of the largest apparel concerns in Los Angeles.

Fully committed debt financing for the deal is being provided by Ares Capital Management, HPS Investment Partners, and GSO Capital Partners.

Also, certain members of Global Brands’ existing management team, co-investors and lenders will be making an equity investment in Differential Brands’ common stock. Global Brands Group Holding is a Hong Kong-listed company, with Global Brands joining sourcing giant Li & Fung in 2009.

“On behalf of the board, I am thrilled that we were able to structure a transaction with the Fung family to acquire one of the leading branded consumer soft goods companies in North America,” said William Sweedler, chairman of the board for Differential Brands and managing partner of Tengram Capital Partners, which played a pivotal role in bringing the parties together and getting the transaction signed.

Jason Rabin, current president of Global Brands North America, said the two ventures will be able to leverage their infrastructure, distribution and sourcing networks to drive growth.

Differential Brands has been trying to grow its business, but the Los Angeles company had a net loss last year of $2.5 million compared with a net loss of $17.8 million in 2016. Net sales for 2017 totaled $164 million compared with $149.3 million the year before.

Before becoming Differential Brands Group, the apparel venture operated as Joe’s Jeans, which hit a financial hurdle in 2013 when it borrowed $90 million to buy Hudson for $97.6 million and then defaulted on its loans.

The company was close to declaring bankruptcy in 2015 but ended up selling its flagship brand, Joe’s Jeans, to Sequential Brands Group and Global Brands Group Holding for $80 million. Funds from the sale were used to retire Joe’s Jeans’ debt.

The Hudson label remained behind and the company was merged with the high-end label Robert Graham and then combined under the Differential Brands Group corporate name, which is publicly traded on the NASDAQ.