Authentic Brands Group (ABG) is delaying its planned IPO in favor of selling stakes in the business to CVC Capital, HPS Investment Partners and some of its existing shareholders in a deal that values ABG at $12.7 billion.
ABG is now targeting an IPO date in 2023 or 2024, according to CNBC. Even though 2021 has proven to be a hot and profitable year for retail IPOs, the portfolio company appears content to wait a year or two. The higher valuation may be part of ABG’s reasoning: Bloomberg News had estimated that ABG could be worth as much as $10 billion during its IPO, lower than the dollar value CVC and HPS have assigned the brand.
“The IPO climate is ridiculous,” said Jamie Salter, CEO of ABG in an interview with CNBC. “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.”
Additionally, ABG’s acquisition strategy could help the company become even larger over the next two to three years. The purchase of Reebok for $2.5 billion gave ABG a foothold in the activewear category, which has been experiencing significant growth. The company’s roster of more than 30 brands will reach more than $20 billion in annual system-wide sales once Reebok officially joins in 2022, and ABG may be able to further increase its value before going public.
“ABG deconstructs and reconstructs the traditional model, owning only the brands, creating a decentralized network of best-in-class partners to execute the rest of the value chain,” said Salter in the company’s July 2021 IPO filing. “We are brand owners, curators and guardians. We don’t manage stores, inventory or supply chains. We don’t manufacture anything. We are a licensing business and are purely focused on brand identity and marketing.”
The transaction with CVC and HPS is expected to close in December 2021, at which time each firm will gain a seat on ABG’s board of directors. BlackRock will keep its position as Authentic Brands’ largest shareholder, and existing investors including Simon Property Group, Lion Capital, Leonard Green & Partners, Brookfield and Shaquille O’Neal will retain “significant equity positions” in the company.
”We plan to work closely with the ABG team to execute on their strategic priorities, particularly around international expansion, given our extensive global footprint and experience in local markets around the world,” said Chris Baldwin, Managing Partner at CVC in a statement.