TowerBrook Takes True Religion Private for $835M
The PE firm, which has also invested in Jimmy Choo, closed its fourth fund with $3.5B in commitments in February
TowerBrook Capital Partners LP is buying apparel company True Religion Apparel Inc. (Nasdaq: TRLG) for $835 million.
Known for its expensive jeans, which cost upwards of $200 per pair, True Religion also makes and sells shirts, sweaters and jackets. Celebrities, including actresses Megan Fox, Kate Hudson, Jennifer Lopez and Jessica Simpson, have been seen wearing the brand.
True Religion announced in October that it was exploring strategic alternatives. Before that announcement, its shares opened at $21.37. On May 10, shares opened at $31.51.
The company’s stock price fell sharply in August, down from about $27 to about $21, which was attributed to increased competition and economic conditions. But in February, the company announced it had beat estimates for the holiday season, and the stock shot back up to about $28.
TowerBrook, headquartered in New York and London, will pay $32 per share in cash for the brand.
TowerBrook must have realized during the due diligence process that True Religion was underrepresented in certain markets around the world, explains Antony Karabus, president of SD Retail Consulting, an advisory unit of Hilco Trading LLC.
"They obviously have plans to grow beyond the core denim into related categories and expand points of distribution," Karabus says, adding that True Religion is likely to grow in complementary categories such as tops and t-shirts. "If they didn't see a significant sales upside, why would they pay such a significant price?"
The downside, he says, is that high-end consumers tend to gravitate easily toward other competing premium denim makers, especially when it comes to new styles and better prices. True Religion competes with J Brand, Paige Denim, Hudson Jeans and Adriano Goldschmied.
True Religion operates through 124 stores in the U.S. and 31 international stores. The brand is also sold in other retail and outlet stores, such as Nordstrom.
Lifestyle brands have seen several deals in the past year. In April, private equity firm Kohlberg Kravis Roberts & Co. LP (NYSE: KKR) bought a majority stake in the company that owns French luxury brands Sandro and Maje. In March, Sycamore Partners announced it would buy pop-culture apparel store Hot Topic Inc. for $600 million. And in February, PVH Corp. (NYSE: PVH) closed a $2.9 billion deal to unite the Calvin Klein brand under one roof.
TowerBrook has more than $8 billion in assets under management. The firm’s portfolio companies include BevMo, a liquor retailer, Rave Holdings LLC, which manages cinemas, and Volution, which makes ventilation products. The firm previously invested in luxury shoe brand Jimmy Choo.
The firm closed its fourth fund in February with $3.5 billion in committed capital.
Guggenheim Securities LLC is serving as True Religion’s financial adviser, while Greenberg Traurig provides legal advice. Deutsche Bank, Jefferies, UBS Investment Bank and Macquarie Capital are providing financing to TowerBrook for the deal. Wachtell Lipton Rosen & Katz is TowerBrook’s legal counsel.
For more on deals in the retail sector, see “Retail M&A: Time-Tested Brands Sell.”
Additional reporting by Anthony Noto
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