March 29, 2013 at 15:04 PM EDT
Sequential Brands nabs two more labels
Yehuda Shmidman is on a buying spree. The chief executive of label management company Sequential Brands Group Inc. has added to his budding brand business with the purchase of clothing labels Ellen Tracy and Caribbean Joe. The nearly $82 million acquisition of the two labels' parent company, Brand Matter, is his second since December. Mr. Shmidman paid $62.3 million in cash and sold stock-options to finance the rest. Mr. Shmidman joined Sequential in the fall from rival Iconix, where he was the chief operator. "It's an exciting day for what we're trying to accomplish—it's the platform," Mr. Shmidman said. "We've got the playbook, we've got the people, and we've got the passion." This brings Sequential's total brand portfolio to six, including recently acquired footwear company Heelys and Justin Timberlake's clothing label, William Rast. The company, which just shifted its headquarters from Los Angeles to New York, announced fourth-quarter revenue of $1.8 million and a net loss of $7.3 million. For the year, the company generated $5.3 million, compared with $500,000 in the prior year, and a net loss of $9.1 million. It's a new start for Ellen Tracy, a 64-year-old brand that has had its share of ups and downs. The label inked a deal in 2009 to sell its sportswear exclusively at Macy's, and that deal will continue, noted Mr. Shmidman, a former Crain's 40 under 40 winner . A Macy's spokesman did not immediately return calls requesting comment. Together, Ellen Tracy and Caribbean Joe are expected to generate between $12 million and $14 million in royalty revenues over the next year. Mr. Shmidman said he plans to continue to expand with additional purchases. Sequential, and another brand licensing company Authentic Brand Group, which is backed by Leonard Green & Partners, have recently been bulking up their brand portfolios, leading to increased competition for Iconix, which is run by Neil Cole. By creating Iconix, Mr. Cole is credited with pioneering a successful licensing business model in the retail world, but now competitors are flocking to his lean, acquisition-driven strategy. Recent rumors have surfaced that Mr. Timberlake, who founded William Rast eight years ago and named the line for his grandfather, is abandoning the apparel label. Mr. Shmidman said such reports are untrue. "I'm excited to be Justin's partner," he said.
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