Dive Brief:

• Private equity firm Lancer Capital has agreed to buy Iconix Brands for $585 million, including net debt, according to a press release.
• After the transaction, Iconix —​ which owns the Umbro, Starter, Mossimo, London Fog and numerous other brands — will become a private company. Iconix expects the deal to close before the end of the third quarter of 2021.
• Under the agreement, Lancer would put in $60 million in equity capital. Providing debt financing for the acquisition is hedge fund Silver Point Capital, according to a securities filing. 

Dive Insight:

Recent years have brought both opportunity and difficulty for those companies playing in the burgeoning industry of brand aggregation. With apparel sellers and retailers struggling in the mall doldrums, acquisition targets have been plenty. But along with acquisitions — often financed on borrowed money by Iconix and peers like Authentic Brands — have come traffic declines and fierce competition among retailers that sell their brands. 

Iconix has been searching for an answer to its debt load for more than a year. At last tally, Iconix's long-term debt stood at $518.2 million while first quarter revenue remained below Q1 2020 levels. Last year, the company's fortunes fell with much of apparel as revenue declined about 27% while money from selling its trademarks for Umbro and Starter in China helped reduce its losses.  

In prior years, Iconix was dealt blows by major retailers, including Target and Walmart, that have stopped carrying its labels. Target, for example, dropped the Mossimo brand as the mass merchant revamped its own house brands. Yet having a large and wide stable of brands helps insulate Iconix and firms like it from over-reliance on any brand partner. 

Brand aggregation has been a growing business in recent years. New technologies and services have made running an online store easier. Meanwhile, the aggregators have kept their books light of assets while pursuing high-margin licensing revenue. That means third parties take on much of the nitty gritty work and risk of sourcing and manufacturing products while the aggregators act as marketing specialists and custodians of intellectual property.  

With plenty of money in both equity and debt markets, some of the biggest market players are now eyeing deals of one kind or another. Authentic Brands is reportedly prepping an initial public offering that would value the company at $10 billion. Meanwhile, Sequential Brands — owner of the Jessica Simpson, Joe's Jeans, And1 and Ellen Tracy brands — is struggling to stabilize its business as it churns through executives and tries to stay in good stead with its lenders. Performance, liquidity and debt problems sent another peer, Bluestem Brands, into bankruptcy last year. 

While Iconix said its total sale price came at a premium of nearly 30% over the company's stock price just ahead of the deal announcement, two law firms have advertised to Iconix shareholders that they are conducting investigations into the deal and whether company leaders sought a high enough deal price. Such investigations are fairly common, though they could portend shareholder challenges ahead.