Iconix to Acquire Op, Closes Mossimo Deal
New York–based Iconix Brand Group continues to look west for its acquisitions, this week announcing its plan to purchase Irvine, Calif.–based surf-lifestyle brand Ocean Pacific.
Launched in 1972 by surfer Jim Jenks, Op has had its ups and downs. The brand saw heady days in the 1970s and ’80s, with sales reaching the $350 million range. By 1992 Op lost the wind from its sales and was forced to file for bankruptcy. Six years later, San Francisco–based investment group Doyle & Boissiere LLC, led by apparel veteran Dick Baker, resuscitated the ailing surfwear maker. Op earned sales of $230 million in 2003. In 2004, New York–based apparel giant Warnaco Group Inc. paid $40 million in cash and assumed $1 million in debt to acquire the brand.
Iconix, a publicly traded company, has agreed to purchase Op for $54 million, including a $10 million cash payment on closing. The remainder of the purchase price will be in the form of a short-term note from Iconix, which is payable in full on or by Dec. 31. As part of the deal, Op retains the license to manufacture and sell juniors’ and women’s swimwear. The junior swim division has been the brand’s strongest division for several seasons.
Neil Cole, chairman and chief executive of Iconix, said the company has been looking to enter the action sports lifestyle business. “Op is the original action sports lifestyle brand, with tremendous authenticity, high brand awareness and applicability to a broad variety of consumer products, including apparel, accessories and sports equipment like surf, snow and skate boards,” Cole said in a statement. Iconix, which completed its acquisition of mass-market brand Mossimo on Oct. 31, specializes in broad-based lifestyle brands. Its portfolio includes Candie’s, Bongo, Joe Boxer, Rampage, Mudd, London Fog and Badgley Mischka. “Op has a large footprint with 15 different international licensees, and Iconix believes it can expand Op’s international business further and significantly grow the brand’s penetration in the U.S.,” Cole concluded.
Warnaco has made strides in restructuring the Op brand. In 2005 it brought several Op licenses in-house, including men’s and women’s apparel, and culled some of the brand’s apparel divisions, including Seven2, an edgy activewear and accessories collection with urban influences. This year Op repositioned its juniors apparel to benefit from the strength of its juniors swim line. Op currently maintains a portfolio of 30 licenses, including footwear, eyewear, kids’ apparel and surfboards.
“While we have made significant progress in the restructuring of the Op business, the sale will allow us to increase our attention on our core brands and on our international opportunities, which are the key drivers of our growth strategy,” said Joe Gromeck, Warnaco’s president and chief executive, in a statement. “Additionally, given the strength of the Op brand, we are pleased to maintain our association with the Op swimwear business,” Gromeck said.
Op president Baker could not be reached for comment.
Industry observers said the deal seems like a win-win for the Op executives who orchestrated the brand’s resuscitation and subsequent sale. Under Iconix, Op— once the epitome of “core” surf—will focus on its mass-market appeal. “Op will be completely out of the core market now, but it has the potential to become a mainstream, broad-based lifestyle brand. It will be interesting to see how Iconix approaches its branding,” said one observer, who declined to be named.
Iconix’s shares dropped 7 cents on the acquisition news to close at $18.64. Warnaco’s shares fell 18 cents to close at $21.24.
Mossimo acquisition complete
On the same day it announced its plans to acquire Op, Iconix finalized its acquisition of Santa Monica, Calif.–based Mossimo Inc., the publicly traded designer and licensor of men’s, women’s and children’s apparel and accessories. The final purchase price for Mossimo is 3.8 million shares of Iconix’s common stock and $67.5 million in cash. Iconix also paid Cherokee Inc. $33 million in connection with a termination and settlement agreement with Cherokee.
Iconix projects the Mossimo brand will generate $20 million to $25 million in 2007 royalty revenue, primarily from a license agreement with the Target Corporation, which holds the exclusive rights for production and distribution of all of Mossimo’s branded products in the United States through January 2010. Additional licenses in Australia, South America, Mexico and Japan will also contribute to the brand’s bottom line.
Mossimo Giannulli, founder and chairman of Mossimo, will continue to work with the company as a consultant. Giannulli’s portion of the acquisition has been estimated to be approximately $88 million.
