On August 12, the purchase of Lucky Brand to the SPARC Group LLC, the stalking horse bidder when Lucky Brand filed for Chapter 11 bankruptcy protection last month, was approved by the U.S. Bankruptcy Court for the District of Delaware.
The all-assets bid included $140.1 million in cash, $51.5 million in credit from vendors and a trade receivables adjustment. SPARC is a 50/50 joint venture of brand licensing and marketing company Authentic Brands Group and mall operator Simon Property Group.
The approval came one day after SPARC was declared the winning bidder for bankrupt Brooks Brothers, in a $325 million deal awaiting bankruptcy court approval that is reported to be imminent.
While SPARC committed to keeping a minimum of 125 Brooks Brothers stores open as part of its purchase, the company did not disclose how many of the approximately 175 Lucky Brand locations it will continue to operate. The company “will negotiate with landlords to keep ‘key stores’ open in North America,” according to CNBC. Lucky Brand is a wholesaler of dungarees and related lifestyle apparel as well as a retailer.
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In an analyst call following the release of Simon’s Q2 2020 earnings, Chairman, CEO and President David Simon said the company is not buying Lucky Brand or Brooks Brothers to recoup rent payments. “We’re doing it for one reason only. We believe in the brands and we think we can make money,” he said. “We’re not buying the inventory at a retail cost to the consumer. We’re buying it at the cost the retailer has and then we sell it. If you have a 35% or 40% gross margin, you’re going to make 35% or 40%.
“These investments are expected to generate positive EBITDA soon after their integration into SPARC,” Simon added. “We expect any equity investments should be returned within a year after integration of operations.”
