Bluestar Alliance Invests in Bebe, Forms JV

Bebe Stores Inc. (Nasdaq: BEBE), a women’s apparel and accessories retailer, has formed a joint venture with Bluestar Alliance LLC to develop a wholesale licensing business based on the Bebe brand.

Bebe Stores, based in Brisbane, California, owns just over 50 percent of the joint venture, with Bluestar owning just under 50 percent and paying $35 million to Bebe. Bebe is a global specialty retailer in the U.S., Puerto Rico and Canada, with 147 Bebe retail stores, an online store and 39 outlet stores, plus licensees selling Bebe branded products in more than 20 countries.

Bluestar Alliance is a brand management company with a portfolio of consumer luxury and mass-market brands, including Kensie, Nanette Lepore, Catherine Malandrino, Michael Bastian, English Laundry and Limited Too. Bluestar has more than 200 licensees distributing products in North America, Europe, Australia, South America and Asia that generate more than $1.5 billion in annual retail sales.

Manny Mashouf, Bebe founder and CEO, says his company pursued the licensing strategy so it could capitalize on its global brand value to generate long-term royalties, and because the brand’s value isn’t reflected in the current perception of the company’s investors.

Joseph Gabbay, Bluestar CEO, says Bebe has long-term growth potential because of a distinct market position, distribution channels and the awareness for its brand internationally. Bluestar will develop a domestic and international licensing business for the joint venture and manage its day-to-day operations.

Retailers have been hounded by problems of having too many brick-and-mortar stores; looming bankruptcies; Internet competition; and “fast fashion,” with quickly produced products to reflect the latest fashion, all of which has created M&A opportunities.

On the real estate front, notable retailers recently trying to restructure their real estate holdings have included American Apparel (NYSE: APP), Abercrombie & Fitch Co. (NYSE: ANF), American Eagle Outfitters (NYSE: AEO), Sears Holdings Corp. (NYSE: SRH) and Wet Seal. American Apparel filed for court protection from creditors under Chapter 11 of federal bankruptcy laws in 2015, and more Chapter 11 restructurings are expected in 2016.

In February, DSW Inc. (NYSE: DSW), the footwear and accessories retailer, announced it was buying Ebuys Inc. to expand into online and international markets . In May, Sears Holdings Corp. (Nasdaq: SHLD) announced it had hired Citigroup Inc. (NYSE: C) and LionTree Advisors to consider plans for selling off assets to generate cash and in June, Invus Group purchased a majority stake in Ashley Stewart.

Latham & Watkins LLP was the legal adviser for Bebe on the deal, with Guggenheim Securities LLC serving as financial adviser. Blank Rome LLP was legal counsel for Bluestar.

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