Nov 23, 2021 - Economy

Authentic Brands Group, after buying Reebok, raises $3.5 billion

Authentic Brands Group earlier today announced it was selling a stake to a group led by private equity firms CVC and HPS, foregoing an IPO.

Illustration: Eniola Odetunde/Axios

Brand management firm Authentic Brands Group on Monday announced that a group led by private equity firms CVC Capital Partners and HPS Investment Partners acquired a significant ownership stake at an enterprise value of $12.7 billion.

Why it matters: The lofty price tag and the deal's structure are a departure from the kind of traditional leveraged buyouts that have been prevalent in the retail sector.

  • Creative dealmaking may be necessary going forward, in light of the high valuations companies can command on the public markets.

Inside the deal: The new investment totals $3.5 billion, at a valuation that works out to 17x pro forma EBITDA, according to a source briefed on the matter.

  • Pro forma EBITDA through September incorporates the financial performance of Reebok, the sneaker company Authentic Brands acquired for $2.5 billion in August.

Background: CVC, which had been a rival bidder for the sneaker brand, approached ABG in August about a potential investment. And there had been ongoing talks between HPS and Authentic Brands CEO Jamie Salter about an investment for years.

What’s next: Leonard Green & Partners and some members of ABG's leadership team sold shares in the transaction, though all remain stakeholders. Existing shareholder BlackRock Long Term Private Capital, which invested in 2019, did not sell.

  • While today's deal precludes an IPO for the time being, ABG, the parent of retail brands such as Brooks Brothers and Forever 21 is now aiming for a listing in 2023 or 2024, per a CNBC report.
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