Brooks Brothers, the venerable retailer that was founded in 1818 and filed for bankruptcy last month, said it would be sold to Simon Property Group, the largest shopping mall operator in the United States, and Authentic Brands Group, a licensing company.
The $ 325 million offer for Brooks Brothers, up from a $ 305 million bid last month from the same suitors, is subject to court approval this week, the companies said in a statement late Tuesday. Buyers are committed to continuing to operate at least 125 Brooks Brothers retail locations. Prior to the pandemic, the company operated 424 retail and outlet stores worldwide, including 236 in the United States, according to court documents.
The offer for Brooks Brothers came from an entity known as the SPARC Group, a joint venture between Simon Property and Authentic Brands Group. The mall owner and ABG have been collaborating on deals to buy other bankrupt retailers in recent years, including the teen chain Aeropostale and the fast-fashion behemoth Forever 21. SPARC also offered to Lucky Brand, the denim company last month filed for bankruptcy. ABG is known for acquiring the intellectual property of brands such as Barneys New York and Sports Illustrated, and then licensing its names to other companies and earning royalties from related products.
The outbreak of coronavirus has overturned several thriving retail brands, especially those targeting clothing, as many stores were forced to close temporarily and demand for new clothing fell in a far less social environment. Chains including JC Penney, J. Crew, Neiman Marcus and the owner of Ann Taylor and Loft have filed for bankruptcy protection since May, struggling with lost sales points and heavy debt taxes. Most say they plan to re-emerge with fewer stores.
Brooks Brothers, based in New York, is the oldest clothing brand in continuous operation in the United States, and has a rare and preserved reputation. It has dressed all but four presidents, dating James Madison, is worn by Clark Gable and Andy Warhol and is the official dressmaker of the Jazz at Lincoln Center Orchestra. Abraham Lincoln wore a Brooks Brothers jacket the night he was murdered.
It was repatriated in the past two decades by Italian industrialist Claudio Del Vecchio, who bought it in 2001. The retailer began to slip in recent years, lamented by the rise of more casual workwear and the shift to online retail, causing a search for new buyers as well as investors. Brooks Brothers said in court documents that since April 2019, its company has been marketing more than 90 potential investors around the world. The retailer said its revenue was more than $ 991 million for the fiscal year ending 2019, with about one-fifth of that coming from its North American e-commerce business.
The pandemic gave a new and unexpected blow to Brooks Brothers, seeing its expensive, formal merchandise and confidence in physical retail. Not only were their stores temporarily closed, but so were the offices of many of their customers. Proms, weddings, graduations, bar mitzvahs and other special occasions have dropped off calendars. At Zoom, sweatpants are indistinguishable from custom dress pants.
The level of distress at Brooks Brothers came into sharper focus this year as the company prepared to close its three U.S. factories, in Massachusetts, New York and North Carolina, continuing its “Made in America” card, and announced plans to lay off nearly 700 employees. Like many retailers, most of its staff ran out – it had about 4,000 workers before the pandemic – and cut the salaries of business workers. Before filing for bankruptcy, it had already decided to close 51 Brooks Brothers stores in the United States.
If approved, the purchase by the SPARC Group will have gone remarkably fast, given that Brooks Brothers filed for bankruptcy protection on July 8th.
In a call this week, David Simon, CEO of Simon Property, outlined several benefits to the purchase of bankruptcy retailers through SPARC, which he called a 50-50 joint venture with ABG. He said the inventory purchased at or below cost, the purchase of intellectual property at ‘attractive values’, and the cost for purchased companies can be reduced and certain leases rejected.
He disputed the idea that Simon Property “buys in these retailers to pay our rent”, saying the company believed in the markets and thought they could make money. He also noted that the company was saving jobs in places like Brooks Brothers.
“That’s what we need to talk about,” he said on the call. “We do our fair share to try to keep this world as normal as we can.”
Elaine Yu carried report.
