Authentic Brands Inc., the parent of retailers Forever 21 and Nine West, owner of Sports Illustrated and holder of the brand name and rights to such legendary stars as Marilyn Monroe and Elvis Presley, has filed to go public.
The company is planning to trade on the New York Stock Exchange under the ticker “AUTH.” BofA Securities, J.P. Morgan and Goldman Sachs & Co. LLC are the lead underwriters in a syndicate of 11 banks working on the deal.
Authentic Brands will have three classes of stock. The Class A and Class C shares will carry one vote, while the Class B shares will carry multiple votes, the company says in its IPO filing documents. Class B stockholders will be able to convert their shares to class A stock under certain circumstances.
The company intends to use the proceeds of the IPO for general corporate purposes, as well as repaying some of its debt.
Authentic Brands describes itself as a brand development, marketing and entertainment company. “We own the intellectual property of our brands and receive licensing revenues from a diverse global network of licensees across a range of categories and territories,” it says in its prospectus.
The company’s most recent acquisition was the Reebok athletic brand , which was purchased from Adidas AG /zigman2/quotes/206448829/delayed XE:ADS -2.46% for a consideration of € 2.1 billion (US$2.467 billion).
Chief Executive Jamie Salter, who founded the company in 2010, explains in a CEO letter included in the documents that the company doesn’t actually manage stores, inventory or supply chains, but rather licenses out those activities.
“We don’t manufacture anything,” says the letter. “We are a licensing business and are purely focused on brand identity and marketing.”
The business model allows the company to have a “strong” royalty program, an “asset-light” operation that doesn’t include inventory or retail lease costs and a focus on building and growing the brands in its portfolio, the letter said.
Salter, the former head of Hilco Consumer Capital Corp., is identified as a key figure in the prospectus, with more than 30 years of experience in the world of lifestyle, fashion, sports and entertainment-brand businesses. Salter brought his four sons in to the company early on.
Corey Salter is now the company’s 32-year-old chief operating officer. Kevin Clarke has also worked with the company since its start in 2010, serving as chief financial officer throughout. Prior to joining Authentic Brands, he was managing director at Barclays.
Authentic Brands has completed more than 30 brand acquisitions and works with 700 partners around the world. Marilyn Monroe was the company’s first entertainment brand. Many of its brands were purchased out of bankruptcy, including Forever 21 and Barneys.
Media reports say the company and Wolverine World Wide Inc. /zigman2/quotes/209231729/composite WWW -2.58% were billion-dollar bidders for Adidas AG’s /zigman2/quotes/206448829/delayed XE:ADS -2.46% Reebok athletic brand recently, but the company has dropped out of the running.
“Our platform combines the operational and financial benefits of a traditional brand licensor with the brand development, marketing and long-term value approach employed by the world’s most successful brands,” the prospectus said. Contracts are typically three to 10 years, usually with long-term renewal options.
“We own the intellectual property of our brands and receive licensing revenues from a diverse global network of licensees across a range of categories and territories.”
The company had net income of $211.0 million in 2020, up from $72.4 million in 2019.
Revenue reached $488.9 million, up from $480.3 million in 2019 and $331 million in 2018. Guaranteed minimum royalties (GMRs) comprised 83% of 2020 revenue. Other revenue sources include additional royalty revenue and royalties from the use of the names, images and likenesses of the company’s entertainment brands. North America accounted for 79% of revenue in 2021.
Between 2016 and 2020, revenue grew at a compound annual growth rate (CAGR) of 31%.
Gross merchandise volume (GMV) was $9.7 billion in 2020, down from $13.5 billion in 2019. Each of Authentic Brands’ seven largest brands generated GMV of more than $500 million in 2020.
Authentic Brands has a “brand development flywheel” that includes more than 230 social media accounts, branded content, and distribution across digital, store and other channels. The company also has more than 17,000 trademarks around the world.
Authentic Brands says it has identified a total addressable market (TAM) with gross market value of $13 trillion, encompassing areas where the company already has a presence, such as clothing and media, areas where the company has just started to do business, like food and beverage, and others that the company has yet to dive into, like alcohol, consumer electronics and mobile payments.