Jamie Salter’s intellectual property giant Authentic Brands Group remains on the hunt for new brands and is currently circling Lee jeans, though a deal still seems a way off.
Kontoor Brands Inc. — a 2019 spin off from VF Corp. — said last week that it had launched a “competitive process” to divest Lee, putting a denim business with projected sales of $750 million this year on the open market.
According to the company, “The process has attracted interest from multiple parties and the company anticipates entering into a definitive agreement to divest the Lee business in 2026.”
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Sources said Morgan Stanley investment banker Carmen Molinos is overseeing the sale.
But the primary party — as might be expected given Salter’s well-known growth ambitions — had been Authentic, which held exclusive negotiations with Kontoor, although sources said that period of exclusivity has expired or is about to.
Kontoor, Authentic and Morgan Stanley all declined to comment Monday.
Brand management deals can take time because IP experts typically line up partners to build the business out in various categories and geographies, seeing how big a business they can build and then working back to the price.
Authentic is said to still be lining up its partners and the two sides are believed to still be negotiating, although the talks haven’t coalesced around a price.
While the process is very much ongoing and anything could happen, observers expect Lee to eventually find its way into Authentic’s portfolio, which already includes everything from the IP of Marilyn Monroe and Brooks Brothers to Quiksilver and Reebok.
“They want to get it done,” said one knowledgeable source about Authentic.
Another said, “It’s an ongoing process, it is happening,” adding that these types of deals can take time. “It’s always a couple weeks away — and it can be a couple weeks for six months.”
In this case, the source said a deal for Lee could come together anywhere from in the next few weeks to the next few months.
One guesstimation had the brand selling for more than $600 million. Kontoor has said that the proceeds from any Lee deal would primarily be used to feed its new $750 million authorization to buy back its own stock.
A financial source said the likely strategy for a new owner of Lee would be to push the brand harder into the warehouse club and mass market channels.
“Everyone doesn’t know how to do that,” the source said. “There’s real skill in landing 10 million units into Costco, that’s no joke.”
Authentic, of course, has proven its ability to build big businesses and quickly.
At the WWD Apparel and Retail CEO Summit in October, Salter said the company logged $32 billion in retail sales annually and would be on a run rate to hit $38 billion after completing its deal for Guess Inc., which closed in January.
Compounded annual growth of 30 percent would get the business almost to $50 billion in five years. But Salter has his eye on $100 billion and, to get there, said he’d have to “make big acquisitions, somewhere between sort of $5 billion and $10 billion.”
Lee would be a big deal, yes, but to keep up with his ambitions, Salter would have to go even bigger.
Scott Baxter, the VF veteran who took Kontoor out on its own as chairman and chief executive officer, told investors last week that the company is looking to make the most of its opportunities in Wrangler and Helly Hanson, which it acquired last year for $900 million.
“Focus is a critical element of our management approach,” Baxter said. “By dedicating the entirety of Kontoor’s resources and capital toward growth-oriented brands, we are confident we can meaningfully accelerate long-term growth and profitability while unlocking significant capital allocation optionality.”