Blue Jeans Company Acquires Retail Chain
Blue Holdings Inc., the blue jeans maker in Commerce, Calif., is getting into the retail business in a big-time way.
The creator of labels such as Antik Denim, Taverniti So and Yanuk announced June 20 that it had signed a merger agreement to acquire Long Rap Inc., whose national retail chain, Up Against the Wall, sells urban contemporary clothing.
“I’ve always said since the beginning that I wanted to be in retail because that is the only way to grow and express yourself in the right way and present your product in the right way,” said Paul Guez, chief executive and president of Blue Holdings, which has one retail store, called Antik Denim, on Melrose Avenue in Los Angeles.
Blue Holdings will pay Long Rap shareholders $16 million in cash and $16 million in Blue Holdings common stock when the deal takes effect. The boards of directors at both companies have approved the merger, which is subject to a number of conditions. Those include completion of due diligence by Blue Holdings, of an audit of Long Rap and of financing necessary to do the transaction. The merger is expected to close in September.
Up Against the Wall, based in Washington, D.C., was founded in 1969 by Stuart “Izzy” Ezrailson, the company’s president, and Charles Rendelman, its chief executive. Mitch Kupchak, general manager of the Los Angeles Lakers, is a silent partner. They have 24 stores throughout the United States, with four in Southern California, selling brands such as LRG, True Religion, 7 for All Mankind, Coogi and Antik Denim. The average store is about 3,200 square feet; in California, they are slightly larger at about 4,000 square feet.
“The merger will enable us to open new stores and expand,” Ezrailson said. He said they hadn’t mapped out a specific growth plan yet, but their stores tend to be in urban areas and appeal to the 18- to 24-year-old customer.
Before the merger was announced, Up Against the Wall had plans to open a store later this year in Las Vegas, one in Sacramento, Calif., and another at an undetermined location also in Northern California. Those plans still hold. “Hopefully, we’ll be in A- and B-plus locations that make sense,” Ezrailson said of future growth plans.
Ezrailson and Guez met at a financial conference earlier this year in Naples, Fla. “Paul was making a presentation in Naples, and I was there,” the retail executive recalled, noting that Guez walked up to him later in the conference and broached the subject of a merger.
Many denim makers are branching out into the retail business. True Religion, another high-end Los Angeles blue jeans line, recently opened its first retail store in Manhattan Beach, Calif., with an eye toward expansion.
“The move of apparel makers into retail has become fairly common,” said apparel analyst Jeff Mintz of Wedbush Morgan Securities in Los Angeles. “But it is not usually done through an acquisition but through building your own stores. What is interesting is they plan to carry other brands besides Blue Holdings’ brands.”
Guez said he hoped to add about 13 stores to the chain in 2007 and another 20 to 25 stores in 2008. Blue Holdings’ labels will make up about 30 percent to 40 percent of the stores’ stock, and the rest will be devoted to other brands.
“If I had to open 27 stores, it would take me a long time and it would be very expensive,” Guez said. “I see my friends at American Eagle Outfitters, BCBG and Guess who are successful with their retail stores. If you do it right and go from production to retail, you have a better chance to grow your company.”
