Retail conglomerate Authentic Brands Group plans to shelve a planned initial public offering and instead sell significant equity stakes in its business to private equity firm CVC Capital, hedge fund HPS Investment Partners and a pool of existing stakeholders, CNBC has learned.
The deal is valued at roughly $12.7 billion, and is expected to be announced Monday, the company said.
Authentic Brands' portfolio companies include apparel retailers Forever 21 and Aeropostale, department store chain Barneys New York, men's suit maker Brooks Brothers and Sports Illustrated magazine. Early next year, its deal to buy sneaker maker Reebok is expected to close, adding another brand to its holdings.
The company had filed for an IPO in early July. But Authentic Brands Chief Executive Jamie Salter said it will target an IPO date in 2023 or 2024. He said he has signed on to be CEO for another five years.
"The IPO climate is ridiculous," said Salter in a phone interview. "I think we would have gotten a massive valuation ... maybe even more than what we sold the business for. But guess what? I'd rather be private."
A wave of retail companies have entered the public market in recent months, from eyeglasses maker Warby Parker and fashion rental platform Rent the Runway to eco-friendly shoe brand Allbirds and e-commerce fashion site Lulu's. Investors have favored names that have a strong footing on the internet, allowing some to fetch valuations as if they were high-growth tech companies.
CNBC had reported that Authentic Brands was seeking about a $10 billion valuation in its public debut.
The transaction with CVC and HPS is expected to close this December, at which point the PE firm and hedge fund will each retain a seat on Authentic Brands' board of directors.
"We plan to work closely with the ABG team to execute on their strategic priorities, particularly around international expansion," said Chis Baldwin, a managing partner at CVC.
BlackRock will keep its position as Authentic Brands' largest shareholder, which it has held since 2019, the company said. Existing investors including U.S. mall owner Simon Property Group, General Atlantic, Leonard Green & Partners, Brookfield and basketball star Shaquille O'Neal will hold on to their equity positions.
When it filed to go public, Authentic Brands reported that its net income in 2020 jumped to $211 million from $72.5 million a year earlier, while its revenue rose about 2% to $489 million.
"We have the same playbook today as we had yesterday," said Salter. "You'll hear about more acquisitions by the end of this year."
CVC recently struck a deal to buy Unilever's tea business. Some of the firm's other portfolio companies include streetwear brand A Bathing Ape and pet goods chain Petco, according to its website. HPS spun out of J.P. Morgan Asset Management in 2016.
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