California Apparel News

BCBG Max Azria Group has retained New York–based investment firm Blackstone Group in a move that signals the Los Angeles–based owner of the BCBGeneration, BCBGMaxAzria and Herve Leger brands could soon be sold.

Founded by Max Azria in 1989, the company’s BCBGMaxAzria and Herve Leger collections are shown biannually on the runways at New York Fashion Week.

According to Reuters, the company could sell for as much as $1 billion, although the company still has an outstanding $230 million loan with Guggenheim Partners.

“It’s a good environment for brands right now in M&A,” said Philippe Faraut, managing director of Los Angeles–based Intrepid Investment Bankers LLC, which is not involved with BCBG or Blackstone.

“Some companies that used to be fetching six times EBITDA are now doing eight or nine times EBITDA.”

(EBITDA—earnings before interest, tax, depreciation and amortization—is a measurement of a company’s profitability.)

“It also depends what the growth profile is and how the stores are doing and what BCBG thinks it can do this year,” Faraut said. “It’s obviously a great brand, and it can do wholesale and retail, which not a lot of companies can do.”

The only issue is BCBG’s $230 million loan from Guggenheim.

“When we do deals now, it’s very difficult to do [a deal with] any kind of debt—aside from factor debt—on an apparel business,” Faraut said. “Most of the companies we see don’t need it. They usually don’t fuel their expansion through debt. They’ve got enough cash flow to fuel their growth.”

Paul Zaffaroni, director of investment banking for Roth Capital Partners in Newport Beach, Calif., agreed the mergers-and-acquisitions market for apparel and footwear brands has been strong for the last year and will continue this year.

“At this MAGIC [trade show in Las Vegas], and the one before, there were a lot more private-equity investors who hadn’t been there for a few years because of what had been going on in the economy,” he said. “I think a lot more private-equity investors are interested in the category partially because the economy is beginning to improve. It’s not a great economy, but I think the worst of it is behind us. The other part of it is there have been some big successes recently in the public market. Given how successful Michael Kors has been and having strong retail store performance behind the brand has opened a lot of eyes. A lot more investors [are now] interested in finding the next Michael Kors and taking it public.”

Since BCBG is a private company, Zaffaroni said, it’s difficult to determine the valuation. But likely buyers for a company the size of BCBG would either be private-equity investors or a very large strategic buyer, he said.

“There’s not really that many large strategic buyers in the United States that could pull it off,” he said. “It would have to be one of these European luxury-goods conglomerates.”—Alison A. Nieder