Cherokee Inc. Is Up for Sale
A British retailer is considering whether to buy Cherokee Inc., the Southern California company that has been successful in licensing brand names to Target Corp. and other mass merchandisers.
According to British Web site The Retail Bulletin (www.theretailbulletin.com), Tesco PLC, Britain’s largest food retailer, was considering a purchase of Cherokee. “We believe that Tesco has received an [investment portfolio] and is looking at it right now,” confirmed one Cherokee official who wished to remain anonymous.
In January, Robert Margolis, Cherokee’s chairman and chief executive officer, hired the Los Angeles branch of UBS, an investment bank, to shop the company around, sources said. Margolis owns 15 percent of Cherokee’s stock.
Cherokee used to manufacture clothing but switched tactics after filing for Chapter 11 bankruptcy protection. In December 1994, the Van Nuys, Calif., company emerged from bankruptcy with a new business model. Instead of manufacturing Cherokee clothing, it began licensing the brand name to Target. Other major retailers in Mexico, France, Canada and other countries sell Cherokee clothing under various licensing agreements. In early 2001, Tesco began selling Cherokee clothing at its stores.
Cherokee is the licensor of 10 other brand names, including Sideout, Carole Little, Molly Malloy and Chorus Line. Santa Monica, Calif.–based Mossimo also pays royalty fees to Cherokee for assistance in securing a licensing deal with Target.
According to reports, Tesco may offer $374 million to purchase Cherokee, whose market capitalization is $300.5 million. Cherokee, a public company, is traded on the NASDAQ. In 2005, its annual revenues were $39 million, and its net income was $17.2 million. On May 12, its stock was trading at $34.46 a share, close to its 52-week high of $37.87 on March 15.
Any offers to buy Cherokee will have to be approved by shareholders. —Deborah Belgum
