Tes strategic acquisition will see Guess contribute $56.5m to obtain all of rag & bone’s operating assets and assume related operating liabilities, while Guess and WHP Global will jointly own the intellectual property of the brand.
GlobalData’s retail analyst Neil Saunders believes the rationale behind the sale is “expansion.” He explained that despite rag & bone being a well-established brand, it has not “internationalised and still has a lot of headroom for growth in its domestic US market.”
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Saunders added that over the last few years, the New York-based brand had not been “on the ball” even with previous ambitions to expand into a global brand but failed to do so and more recently had issues regarding finding the right leadership to help in its pursuit to success.
“This deal gives rag & bone much more financial and operational muscle and should correct some of these problems. It will make the brand more visible both in the US and potentially internationally and allow rag & bone to confidently embark on a big expansion,” said Saunders.
Specific numbers regarding the complete acquisition were not disclosed, however, it was noted that Guess would be responsible for a potential earn-out of up to $12.8m.
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This acquisition will be Guess’s first in 43 years and Saunders pointed out that rag & bone is an addition to the retailer’s core offering, it will use its existing distribution network and wholesale partners to increase rag & bone’s visibility and will allow the retailer to attract slightly different customers.
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By GlobalDataOverall, Saunders expects the deal to be a positive move for all involved but he’s advised that even with mentions of rag & bone continuing to operate as a standalone unit, Guess would be wise to keep some distance from Rag & Bone to allow the New York brand to “retain its brand positions and essence.”
Carlos Alberini, CEO of Guess commented: “Guess? has an incredible platform with a strong global distribution network and outstanding licensee partners that will enable us to power the growth and expansion of the rag & bone business. We expect the transaction to deliver earnings per share accretion in the first year and strong value creation for our shareholders for years to come.”
rag & bone currently operates 34 stores across the US and two in the UK, in addition to being available in upscale boutiques, department stores, and through ecommerce channels worldwide.
Yehuda Shmidman, chairman and CEO of WHP Global, emphasised the strategic significance of the acquisition and said: “The acquisition of rag & bone aligns us with powerful partners and grows WHP Global’s portfolio to over $7.5bn in retail sales across 11 brands.”
Andrew Rosen, chairman of the board at rag & bone added: It’s a great opportunity for our team to take the brand to the next level, blending our unique styles and respective expertise to create new possibilities for rag & bone on a global scale.”
Financial advisors and legal counsel involved in the transaction include The Sage Group, LLC, O’Melveny & Myers LLP, Kirkland & Ellis LLP, Solomon Partners, L.P., Golenbock Eiseman Assor Bell & Peskoe LLP, and Katten Muchin Rosenman LLP.
The acquisition is expected to close in the first quarter of Guess’ fiscal year 2025.
