US: Liz Claiborne to sell Mexx in private equity deal
Liz Claiborne has struggled to reduce losses at Mexx
Liz Claiborne has announced plans to sell its loss-making Mexx business to a joint venture in partnership with private-equity firm The Gores Group.
The apparel and accessories company said today (2 September) that it will sell the business in exchange for an 18.75% stake in the joint venture and US$85m.
The Gores Group will own an 81.25% stake in the joint venture, and Liz Claiborne says the private-equity firm has "committed to supporting the business through its ongoing turnaround".
The global Mexx business will continue to be led by Thomas Grote as CEO, while Lloyd Perlmutter will remain CEO of Mexx Canada.
Liz Claiborne said the deal will strengthen its financial position, allow it to de-consolidate the losses from Mexx, and help it to lower debt, yet still allow it to "participate in the long term growth potential of Mexx".
"We've brought the Mexx European business to the early stages of a true turnaround," said Liz Claiborne CEO William McComb. "But there is more to be done, and in uncertain times and true market volatility, de-risking became essential.
"This transaction balances risk mitigation, debt reduction, and ongoing upside realisation in just the right mix for our shareholders.
"The Gores Group is an ideal partner for the Mexx business given its extensive experience in successful corporate carve-outs and growing presence in the apparel retail sector.
"With 2010 revenues of over $730m, we believe the Mexx business will ultimately thrive under Thomas Grote's continued leadership as a private enterprise after the completion of this transaction."
Liz Claiborne, which also owns brands such as Juicy Couture, Kate Spade and Lucky Brand, bought Mexx in May 2001 for about $264m as part of efforts to diversify its portfolio, but has struggled to reduce the division’s losses.
It said the joint venture deal will help in its goal of reducing its 2011 debt to a level below last year's $578m.
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