Guess is poised to get a lot bigger.
On Friday, Authentic Brands Group finalized the deal to acquire a 51 percent stake in a newly formed entity that will own and license substantially all of Guess’ intellectual property and assume the majority of its product licensing agreements globally. The remaining 49 percent will be owned by Guess cofounders Maurice and Paul Marciano, Nicolai Marciano, Guess chief executive officer. Carlos Alberini and certain other trusts, foundations and affiliates.
The all-cash deal, first announced in August, is for $16.75 a share, a premium of 73 percent to the company’s closing price on March 14 when WHP Global offered $13 a share. The deal values Guess at $1.4 billion and takes the company private after 30 years in the public market.
Authentic pulled off an 11-hour deal since Guess had nearly inked a deal with its smaller rival, WHP Global, earlier last year.
Guess, which has sales of around $6 billion, will become the second largest company in Authentic’s portfolio, behind Reebok, and bring Authentic’s annual retail sales to $38 billion.
Current Guess management will continue to operate the company and its headquarters in Switzerland will remain as the Guess design, creative and distribution hub.
“Although Guess is doing $6 billion, the question is, why isn’t it doing $10 billion,” Jamie Salter, chief executive officer of Authentic, told WWD. “The reason is, they’re still working off a bunch of old practices — the way they did business for 45 years. I think we can change that.”
Salter added that while Guess is “a ginormous brand, it could use a little bit of help on the marketing side, the social side, to bring it into the 21st century.”
So it won’t be long until Authentic brings Guess into the entertainment, live events and hospitality space, Salter said. “You’ll see some increases there.”
He said Paul Marciano, who founded Guess with his brothers in Los Angeles in 1981 as a denim brand, “is very open to working closely with us on the marketing and social side of the business. As you know, content drives commerce.”
Paul Marciano concurred.
Until fairly recently, he said he didn’t know much about the brand management companies like Authentic and WHP Global and their ability to split the operations and intellectual property of businesses to help them grow.
So even though Guess continues to perform “extremely well,” Marciano said, it was time to escape the scrutiny of Wall Street.
“We have been public for 30 years, but to be public today in the retail and fashion world is a completely different experience.”
He continued: “We have always been in control of the brand, my brothers and I, and after my brothers retired, I’m still working every day. I love my job, and I have so many ideas and future projects that I want to do, but as a public company, it is very difficult, because everything is driven by quarterly reports and quarterly results, and it’s not viable for fashion company, especially a women’s fashion company, to predict the business every single week, every single quarter.”
He said being private will allow him to explore avenues of growth he was unable to as a publicly traded company.
“To have the freedom to be able to do projects that we need to build [the company], like going into a new territory like Brazil or Argentina, takes investment, but the Street will not give you that.”
He said once he met Salter, he could envision a bright future for Guess.
“He is really an incredible brand builder,” Marciano said. Although when Authentic started, it focused more on distressed companies, that strategy has shifted and it is now adding strong brands. “That caught my attention,” he said.
He stressed that he and the Guess team will continue to have 100 percent control over product, but he’s eager to tap into Authentic’s expertise in other areas.
“I don’t know entertainment — they do. I don’t know sports — they do. They have great IP for Marilyn Monroe, David Beckham, Kevin Hart. The crossover could be tremendous.”
And in terms of product, Marciano can see expansion into luxury underwear, loungewear, home as long as they are “relevant to the brand. We’ve done nothing but protect the brand for 45 years, and that’s very different than a lot of companies.”
Salter said he also sees opportunity to expand the existing Guess portfolio, with “big increases in sportswear, denim and kids.”
Marciano said he just returned from Italy and sees potential for adding to the Guess-Authentic portfolio.
“We’re looking at companies that have lost their founders, especially in Italy, in the denim business, in the fashion business. Since the founders are not there anymore, these companies have lacked discipline, direction and strategy, and they could use our help.”
But more immediately, Salter believes Guess’s rich archives are another plus.
“Going back 45 years, there’s just so much good stuff in the archives,” Salter said. “When we look to buy brands, we look at what is in the archive files, and how we bring certain styles back. That will make Guess even more valuable in the future.”
Salter said Authentic will work quickly to grow the Guess business.
“We come out of the gate strong and hard,” he said. “And then we go to a normal growth rate. So for the next 24 months, Guess is going to have a huge increase in revenue globally, just because it’s now going on our platform. We’re incredibly diversified in 150 countries all over the world.”
Salter said the deal means Guess will be “neck and neck” with Reebok as Authentic’s largest brand.
“We’re super excited. Paul’s absolutely brilliant. He’s very passionate about the brand, and I truly believe with the Authentic AI platform, we can speed up so many things for him. Our platform is completely digitized and we’re way ahead of most of the industry on the AI side of the business. AI is magic and you need great magicians to make magic. But I truly believe we’re going to get Guess moving so much quicker on the marketing, creative and the sourcing side.”
