Newsmakers 2015: Joe’s Jeans Undergoes a Metamorphosis

It was a topsy-turvy year for Joe’s Jeans, the Los Angeles premium-jeans maker launched in 2001 by designer Joe Dahan.

Earlier this year, one of its major creditors threatened to foreclose on the company, which was having trouble repaying some $90 million in loans used two years ago to buy competitor Hudson Clothing, another Los Angeles premium-jeans manufacturer.

Last September, Joe’s Jeans, a publicly traded company, wrapped up negotiations with Tengram Capital Partners in a deal that needs to be approved by Joe’s Jeans’ shareholders at their annual meeting in January.

Under the negotiated plan, the Joe’s Jeans brand was sold to Sequential Brands Group and Global Brands Group Holding for $80 million. Proceeds from the transaction were used to retire the debt built up by Joe’s Jeans to buy Hudson.

Sequential Brands —whose other labels include William Rast, Ellen Tracy, Caribbean Joe and Jessica Simpson—signed a long-term licensing agreement for all the brand’s core categories with Global Brands. Dahan will be the creative director for the label.

Hudson, the Los Angeles blue-jeans company currently headed by founder Peter Kim, will be merged into a new company with the Robert Graham brand, which also has a significant investment from Tengram Capital.

Now that the Joe’s brand has been sold to Sequential, Joe’s Jeans will be renamed Differential Brands Group and remain listed on the Nasdaq. Differential Brands will encompass the Hudson and Robert Graham labels.

Following the merger of Hudson and Robert Graham, Robert Graham stockholders will own approximately 47.3 percent of Differential Brands Group’s stock; the preferred stock owned by Tengram will be converted into approximately 23.9 percent of the new entity’s common stock; the convertible note holders, such as Peter Kim and an affiliate of Fireman Capital Partners, will own 14 percent of the stock; and the existing stockholders (including the outstanding equity awards under the company’s incentive plan) will own approximately 14.2 percent of the common stock on a fully diluted basis.

In addition, an affiliate of Tengram Capital will purchase $50 million of new series A convertible preferred stock of Differential Brands Group to facilitate acquisitions of complementary premium brands.

When the merger is complete, Michael Buckley, currently the chief executive of Robert Graham, will become the chief executive of Differential Brands Group.