Differential Brands Group agreed to acquire a large part of Global Brands Group’s (GBG) North American inbound licensing, accessories and kids businesses for $1.38 billion.

The deal would bring together Differential’s owned Hudson, Robert Graham and Swims brands with GBG’s long-term licenses for Calvin Klein, Under Armour, Tommy Hilfiger and Joe’s Jeans. It also brings the GBG Kids North American business, which has licenses for children’s properties owned by Mattel, Lego, Hasbro, Sanrio, Pokemon, Mojang/Microsoft (Minecraft) and others. With the acquisition, which the companies expect to close by Aug. 31, Differential will have more than $2.2 billion in annual revenue (including $2 billion from the acquired brands) across men’s, women’s and children’s apparel and accessories, up from $164 million as of last Dec. 31. The deal was negotiated during the past five weeks and signed about an hour before it was announced today, GBG CEO Bruce Rockowitz told analysts.

The sale followed GBG’s strategic review of its business and will create a “much simpler organization” of men’s and women’s fashion brands, including Juicy Couture, Spyder, Jones New York, Kenneth Cole, Frye and others that represent “the best way to improve shareholder value,” Rockowitz said.

GBG also will retain businesses in Europe and Asia as well as its interest in the CAA-GBG brand management business with Creative Artists Agency, Rockowitz said. The slimmed down company will have 3,000 employees and about $1.8 billion in annual revenue and keep its offices in New York, while those based on the West Coast will shift to Differential, he said. GBG expects to be able to make up the revenue lost in the sale within three years, Rockowitz said. The decision to sell the businesses was partly driven by a need to decrease debt, much of it incurred when GBG was formed in 2014 in a spinoff from Li and Fung. GBG had $996 million in debt as of September, down from $1.1 billion in March 2017.

“With this transaction, the group will be able to improve our balance sheet significantly and simplify our organization, while focusing on the less established lines of business where we see high growth potential going forward,” Rockowitz said.

GBG North America President Jason Rabin, who will join Differential, said the company will invest “significant capital” to transform itself into a “large scale North American branded platform.”

The agreement also returns Joe’s Jeans to Differential, which sold the brand to GBG and Sequential Brands for $80 million in 2015 as part of a settlement with lender Tengram Capital Partners, which had threatened it with foreclosure. After the sale, the company changed its name to Differential and has since expanded its business by acquiring the Robert Graham (men’s and women’s apparel) and Swims (footwear, apparel) brands in 2016. Sequential later acquired all rights to the Joe’s Jeans brand, but signed a licensing deal with GBG to design and produce apparel.

Differential is “confident” the acquisition will “create tremendous value” for its shareholders and “provide enhanced opportunities” in North America “for our brands and partners,” said Differential Chairman William Sweedler, who also is a managing partner at Tengram.

Differential has licensing agreements for Robert Graham across 13 categories, including men’s dress shirts, belts and shoes, while Swim has deals for men’s and women’s footwear and outerwear. Differential also had 30 Robert Graham (18 full-price, 12 outlet) stores as of May 15, along with two company-owned Swims outlets and eight licensed locations outside the U.S. A full-priced company-owned Swims store will open this fall. There is also a Robert Graham consumer catalog business. The Hudson brand, which was acquired in 2013, has been applied to men’s, women’s and children’s jeans and will introduced for sportswear this fall.

In addition to boosting revenue, the GBG brands also will broaden Differential’s business, which has largely been confined to department store chains. Nordstrom accounted for about 10% of Differential’s annual revenue of $164 million in the fiscal ended Dec. 31, the company said.

Contact:

Global Brands Group, Dow Famulak, Pres. Brand Management, 646-839-7001, dowfamulak@globalvbrandsgroup.com

Differential Brands Group, Lori Nembirkow, SVP Legal & Compliance, lori@differentialbrandsgroup.com