Guess said on Wednesday it will be taken private in a deal valued at $1.4 billion, including debt, after reaching an agreement with a group that includes its co-founders, its chief executive, and Reebok-owner Authentic Brands Group.
Under the terms of the deal, co-founders Maurice Marciano and Paul Marciano, alongside Chief Executive Carlos Alberini, will roll over their equity and join forces with Authentic Brands.
The brand-management company will acquire 51% of Guess’ intellectual property, while the remaining interest will stay with existing shareholders.
Guess shareholders will receive $16.75 a share in cash, representing a 26% premium to Tuesday’s closing price and a 73% premium to the stock’s level on March 14, the last trading day before Guess disclosed an unsolicited bid from WHP Global.
Shares surged 26% in early Wednesday trading to $16.77, though they remain down about 38% over the past year amid stiff retail competition and macroeconomic uncertainty.
Management to stay on board
Guess said current management will continue to run the business and retain 100% ownership of its operating company.
Authentic Brands, best known for its portfolio that includes Reebok, Juicy Couture, and Dockers, will focus on monetising Guess’ intellectual property, while the operating team drives the retail business.
The transaction is expected to close in the fourth quarter of the current fiscal year.
It will be financed through a mix of rollover equity by the Marciano-Alberini group and cash commitments from Authentic Brands.
“The special committee evaluated a number of potential options and unanimously determined that the transaction with Authentic and existing shareholders is the best path forward for Guess,” said Alex Yemenidjian, chairman of the special committee of independent directors.
The board approved the deal, with the co-founders and Alberini recusing themselves.
Guess going private is part of wider retail consolidation
The deal comes amid a wave of consolidation in the apparel and footwear industry.
Earlier this year, 3G Capital agreed to take Skechers private, while Dick’s Sporting Goods announced plans to acquire Foot Locker.
Authentic Brands has also been active, acquiring Dockers from Levi Strauss & Co.
For Guess, being taken private is intended to provide more flexibility to adapt to shifting consumer demand and to pursue long-term strategies outside the pressures of public markets.
Financial strains add pressure
Guess had previously received a $13-per-share offer from WHP Global in March, which prompted the board to form a special committee to evaluate potential bids.
The company had already partnered with WHP to acquire fashion brand rag & bone.
The decision to accept the Authentic Brands-led offer follows years of financial strain.
Guess has struggled with weak cash profitability, recording an average free cash flow margin of just 3.9% over the past two years.
It burned through $15.7 million in cash over the last year, and its $1.59 billion debt load far outweighed the $151.2 million in cash on its balance sheet.
By going private, Guess hopes to restructure its finances and strengthen its position in a highly competitive retail landscape.
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