Water Cooler: What players in the mid market are talking about

Fifth Ave. meets Wall Street Former Bloomingdales CEO and Chairman Marvin Traub has launched a new private equity firm, TSM Capital, to invest in the luxury brand and retail space within the apparel, accessories, jewelry and home sectors. Traub is partnering up with Mortimer Singer, heir to the Singer sewing machine throne, and Aslaug Magnusdottir. The fledgling firm, which will be based in New York, has already wrapped up its first deal, buying U.K.-based fashion house, Matthew Williamson Holdings. While the fashion world remembers Traub for his over 20-year stint at Bloomingdales, since 1994 he has run Marvin Traub Associates, a marketing and consulting firm focusing on the retail, marketing and consumer goods industries. He has also served as a senior advisor to boutique bank Financo Inc., and founded both the The Home Company and the Johnnie Walker Collection, in subsequent years starting in 1997. TSM’s focus will concentrate on “early stage” businesses, defined in the press release as having revenues of between $5 million and $50 million. In a statement, Traub cited that it’s an area of the market currently being ignored. “Very few professional investors focus on investments in early stage luxury businesses,” he said. “I believe that there is significant need for a financial investor in this sector that has extensive U.S. and international expertise and is able to actively support the brands in their growth.” However, contrary to Traub’s thesis, a number of private equity firms have found success investing in early-stage fashion companies. Advent International, for example, scored a huge win recently with the IPO of lululemon Athletica, a yoga-clothing manufacturer and retailer, while Bear Stearns Merchant Banking, just a few days ahead of the lululemon IPO, exited its investment in Seven for all Mankind through a $775 million sale to VF Corp. Hangin’ Up the Gloves After a drawn out battle with suitor Hidary Group, Everlast Worldwide, a manufacturer of boxing equipment, reached a settlement with Hidary, which had filed a lawsuit seeking to block the company’s pending merger with Brands Holdings Limited, a subsidiary of Sports Direct International. As part of the settlement, Everlast agreed to publicly reaffirm the board’s commitment to comply with its fiduciary responsibilities, specifically stating that it would continue to consider unsolicited acquisition proposals. According to an Everlast proxy statement, the company entered into a merger agreement with Hidary on June 1, valued at $26.50 a share. The agreement, however, contained a 30-day “go shop” clause, and on June 21 Brands Holdings entered the picture with an offer valued at $30 a share. A week later, Everlast abandoned its deal with Hidary, forfeiting $3 million in the form of a termination fee. Hidary responded by upping its offer to $31.25 a share and Brands quickly countered with a $33-per-share bid. Activist investors Burlingame Asset Management and Aquamarine Capital Management, meanwhile, wrote to the Everlast board, saying that the company had failed to conduct an open and transparent bid process, and the former even argued that the Hidary proposal was superior, given that it provided shareholders the ability to roll over their equity “to participate in the future successes,” and allowed for the investors to defer taxes on up to half of their gains. Hidary, meanwhile, filed its suit in early July, claiming that Everlast did not negotiate in “good faith” and had breached its original deal with Hidary. According to M&A sister publication Mergers & Acquisitions Report, it’s possible that new bids for Everlast could emerge. Hidary, remains a potential suitor, while other entities such as Under Armour, would make for a logical buyer as well. All in the family Jeb Bush has joined the family business… Nope, that other family business. According to Reuters, citing sources familiar with the situation, the younger brother to President George W. Bush has joined the private equity arm of Lehman Brothers as an adviser. The new role follows Jeb Bush’s eight-year stint as the governor of Florida that ended this year. The move into private equity is a path already blazed by Jeb Bush’s younger brother Marvin Bush, who is a co-founder of Winston Partners, a McLean, Virginia buyout shop and hedge fund. George Bush Sr., meanwhile, also served in an advisory role for the Carlyle Group, before moving on from the position in late 2003. To some extent, the President also has a limited track record in the industry, as he was appointed as a director at Caterair in the early 1990s when Carlyle bought the airline catering business. Reuters didn’t provide any speculation regarding Bush’s role at the bank, although a story in the U.K.-based Independent hinted that the move could be in preparation for the industry’s tax fight on Capitol Hill. A call to Lehman’s PR flak, however, was not returned A healthy pause? The numbers are in, and according to Dealogic, August represented the slowest month for M&A in roughly two years. According to the data provider, announced M&A in the U.S. fell to $53.85 billion, representing the lowest monthly volume since July 2005. The number also represented a 22% decline versus last August. The private equity slump played a major role in the pullback, as U.S. PE buyers inked just $5.3 billion worth of deals for the month, down from $17.7 billion in the corresponding August from last year. The total number of PE deals fell to 52 versus 109 transactions year over year. Also of note, not a single billion dollar-plus buyout was recorded in all of August. From Fraternity Brothers to Brooks Brothers A typical wardrobe in college generally includes a concert tee-shirt, an old pair of Birkenstocks, and of course, a tattered pair of jeans that might resemble something Joe Elliot would have worn during his heyday. If the students are enrolled in the business program at Illinois State University, that wardrobe better include some collared shirts and khakis. The Daily Vidette, ISU’s campus newspaper, reports that participants in the school’s business program now have to adhere to a “business casual” dress code, which was described as precluding sneakers, flip flops, hats or pajama bottoms. During the first week of school, students were given some flexibility, but after a week, offending students would be removed from the classroom. The Wall Street Journal’s “Deal Journal” blog reported that offenders could face a failing grade on assignments for repeated offences. Is it hot in here? Fedders North American Operations, a manufacturer of air treatment products, said it would file for Chapter 11, and as part of the reorganization process would seek a possible sale of the business out of bankruptcy. The company’s non-North American subsidiaries, including operations in China, India and the Philippines were not included in the bankruptcy filing. “In order to ensure the company’s business units’ viability and growth prospects, an exploration of the sale of the company’s businesses is in the best interest of all of its constituents,” Fedders President and CEO Michael Giordano said in a statement. “The Chapter 11 process will allow time for prospective buyers to evaluate the company and its business units while day-to-day operations continue.” Alongside the bankruptcy filing, Fedders lined up a $79 million debtor-in-possession financing commitment from Goldman Sachs Credit Partners. The potential sale signals a change in the deal landscape, as bankruptcies have been in short supply during the past couple of years. Private equity firms such as KPS Special Situations, Sun Capital and Meriturn Partners, could be considered possible suitors given their experience in the distressed space. Accessorizing an earnings statement Alongside Tandy Brands Accessories annual earnings report, the publicly held maker of fashion accessories announced that it had retained Financo Inc. to assist the management team and the company’s board on the evaluation of a “full range” of options. The company made no mention of a specific course of action, though a potential sale would seem like a logical possibility. J.S.B. Jenkins, the president and CEO of the company, said in a statement: “While our initiatives over the past 18 months have significantly improved profitability and we remain confident in the future of the company, we believe that now is an appropriate time to explore a full range of strategic options to further enhance shareholder value.” Tandy reported net income of $1.9 million for the 2007 fiscal year, on revenue of $195.8 million. In 2006, the company ended the year in the red, with a net loss of $3.5 million. Jenkins attributed the improvement to exiting certain lines in the company’s women’s business. M&A to the rescue? New York Stock Exchange-listed SIRVA Inc. engaged Goldman Sachs as a financial adviser to assist the company with its ongoing evaluation of strategic alternatives. “Although we’ve undertaken a number of steps to strengthen our position, we need to address the company’s debt levels and assess our options for reducing them,” SIRVA CEO Bob Tieken said in a statement. While no roadmap was provided as to what those options might be, it would make sense that SIRVA would consider a public-to-private opportunity. Clayton Dubilier & Rice launched the company 1998 as a rollup of several moving-services companies, including North American Van Lines, Allied and Pickfords. The company went public at the end of 2003, and according to Standard & Poor’s, made 12 acquisitions by 2004. The next year, however, the company announced it would have to restate its financial statements for the five years starting in 2000. So far this year, SIRVA has been busy closing certain operations as a way to move away from capital intensive businesses. And in June, the company settled a class action lawsuit that was originally filed in 2005 related to false statements SIRVA made in press releases. Meanwhile, the company’s business is tied directly to the housing market, which has suffered in the aftermath of the subprime mortgage collapse. The only question, however, is will the company be able to line up any bidders? Another step closer to popping the cork According to M&A sister publication Mergers & Acquisitions Report, San Rafael, Calif.-based REIT Vintage Wine Trust began sending out books for its pending auction. Deutsche Bank Securities is advising the company on a potential sale. Vintage currently controls 10 California vineyards. Its total portfolio is valued at around $150 million, with the Monterey County vineyard Terra Ventosa representing its prime property, with a valuation of $37.1 million. Vintage CFO Tamara Fischer told M&A Report that the company is considering all kinds of bidders, including people both in and out of the wine industry. Seeking the Mother Lode U.S. Energy Corp. and Crested Corp. have engaged Toronto-based IBK Capital Corp. to seek out strategic alternatives for subsidiary Sutter Gold Mining Inc. The possibilities include the sale of the company, a merger with a strategic partner or “any number of other available options,” according to a press release. Sutter Gold is a mineral exploration and development company, concentrating on gold-yielding properties in Sutter Creek, Calif. Its exploration activities are based around the Mother Lode gold belt of north-central Calif. The publicly held company, which trades on the TSX venture exchange, is headquartered in Riverton, Wyoming. Sutter went public through a reverse merger with Vancouver-based Globemin Resources. U.S. Energy Corp. is the largest single shareholder in the company. Mark Larsen, president and CEO of U.S. Energy, said in a statement: “We feel that Sutter is significantly undervalued in light of the status of its advanced-stage gold mine in California, and we are confident that this effort will ultimately reflect in a significantly enhanced value of our Sutter holdings.” PE-variety skeletons As the presidential election continues to gain steam, the hunt is on for candidate contradictions. The Wall Street Journal found a big one when the paper discovered that Democrat candidate John Edwards, an investor in and former adviser to Fortress Investment Group, has investments (through Fortress) in lenders that have foreclosed on Katrina victims. Edwards, of course, has been a staunch opponent of predatory lending practices. This is not the first time Edwards’ ties to Fortress have made for headline fodder. The Washington Post wrote a story in April of this year identifying that Edwards has long railed against offshore tax shelters, making his employment at Fortress a curious choice considering it has incorporated its hedge funds in the Cayman Islands. At the same time, however, the paper pointed out that the former North Carolina senator had received more money in donations from Fortress than any other single company. Perhaps the fallout is just the cost of doing business. Legislators seeing red As the Congress and Senate consider various legislative efforts to coerce China into increasing the value of its currency, both President Bush and Treasury Secretary Henry Paulson have each taken turns reaching out to China, whose foreign-exchange reserves surpass $1.3 trillion. The proposed legislation, according to reports, would seek to penalize countries whose currency is not market driven by imposing tariffs on imports. “Countries” in this instance, is understood to mean China. Paulson, who visited with Chinese President Hu Jintao and other top Chinese leaders in late July, has championed a less aggressive tone with China. In transcripts of a press roundtable following the China visit, Paulson noted: “I talk with many leaders in Congress. I understand their frustrations. I share a similar objective with many of them wanting quicker reform of the currency and China to move quicker to open up their markets. They know that I don’t believe legislation is the right way to proceed. They know I believe that the right way to make progress is through direct engagement [on a] bilateral and a multilateral basis. They know I believe we’re making progress.” President Bush, meanwhile, who was scheduled to attend the early September APEC (Asia-Pacific Economic Cooperation) meeting, has echoed this sentiment. Market News International published a transcript in which President Bush spoke with foreign reporters. In the transcript, Bush noted: “We’ve got a strategic relationship that allows for engagement and for us to deal with a major trade deficit.” (c) 2007 Mergers and Acquisitions Journal and SourceMedia, Inc. All Rights Reserved. http://www.majournal.com http://www.sourcemedia.com