M&A
Joe's to Acquire Hudson
Two major LA denim brands will soon be one company. Joe’s Jeans Inc. signed a deal to acquire Hudson Clothing Holdings Inc. for $97.6 million, payable in cash and convertible notes issued by Joe’s Jeans.
Both companies are premium brands that have been extremely popular in recent years, while competing with other LA labels such as J Brand and True Religion, two other local brands sold within the last year. Fast Retailing, the Japanese parent company of Uniqlo, acquired an 80.1 percent interest in J Brand in November, and True Religion is working on closing an $835 million acquisition deal with TowerBrook Capital Partners.
“We are extremely excited about joining forces with Hudson Jeans. Once the acquisition is complete, we expect to nearly double the size of our business, meaningfully increase our international and e-commerce penetration, and enhance our overall prospects for growth,” said Marc Crossman, president and chief executive of Joe’s Jeans. “We believe by leveraging our sourcing capabilities to realize cost savings across all three components of making a jean, from fabric, trim to labor, will significantly reduce our input costs while we drive top-line sales by building on the strengths of each company’s distribution.”
The two companies will maintain separate facilities and their own staff to preserve their distinct DNA.
Hudson Clothing was founded in 2002 by Peter Kim, who will become a board member of Joe’s Jeans and remain Hudson’s chief executive. “We are thrilled at the prospect of joining a highly respected team of people that has created an incredible business,” Kim said. “We look forward to benefiting from each other’s strengths and to entering a new chapter of growth.”
Crossman said the deal started to take form last November. He and Kim are both surfers and batted around the idea of combining forces to take advantage of the various cost savings that could be had with a larger company. “We started to realize there is a lot of stuff we could do together that would expand both our businesses,” Crossman said.
Joe’s Jeans does more sourcing in Mexico than Hudson, which does a small part of its production there. Crossman said he wouldn’t be shifting Hudson’s sourcing right now, but he could help Hudson get better prices in Mexico.
The transaction between the two denim companies is expected to close Aug. 31. Fireman Capital Partners, headed by Dan Fireman, acquired a controlling stake in Hudson in 2009. Fireman sold 80 percent of its interest and retained 20 percent, Crossman said.
It is estimated that Hudson Clothing’s annual revenues are $90 million. It has a core line of denim that is known for its washes, cuts, fabrics and colors. Joe’s Jeans is publicly traded on the NASDAQ, with annual revenues of $118.6 million in 2012.
Threadstone Advisors served as financial adviser and Akin Gump Strauss Hauer & Feld served as legal adviser to Joe’s Jeans. Lazard Middle Market served as financial adviser and McDermott Will & Emery served as legal advisers to Hudson.
