Apparel retailer Express snags investment from WHP

WHP Global, a brand management firm, has partnered with Express in a deal that will see WHP invest a total of $260 million in the apparel retailer Express and a separate intellectual property joint venture the two parties are forming, according to an announcement.

Why it matters: With retail M&A taking a step back this year (beyond a certain grocery deal), WHP's investment is a creative way to invest in a retailer, namely its IP.

Details: WHP is investing $235 million in the IP joint venture in exchange for a 60% stake, valuing the Express brand at $400 million.

• Express will receive a 40% stake in the venture in exchange for handing over its IP to the joint venture.
• WHP will also acquire 5.4 million newly issued shares of Express, which consists of the retailer's omni-channel platform and operations, at $4.60 per share via a PIPE (private investment in public equity).
• The PIPE equates to a 7.4% stake valued at $25 million.

Of note: While the model does not exactly mirror brand management firm Authentic Brands Group's structure, which separates its intellectual property holdings from the operations, it's certainly in that spirit.

• The deal also supports Express' operations, while limiting WHP's risk exposure to it.

The big picture: The IP joint venture will allow the Express brand to be licensed out to non-core categories and international expansion. (Overseas retail operations are frequently created via licensing agreements.)

• The retailer can use the proceeds to reduce debt and strengthen its balance sheet.