IPO Paperwork Lifts the Curtain on ABG’s Financials
Authentic Brands Group has made it official, filing the registration paperwork for an initial public offering with the Securities and Exchange Commission.
As WWD reported last month, ABG had confidentially revealed its plans to go public at the end of May in a deal that could value the firm at $10 billion. ABG did not specify a share price or how many shares would be sold on the public market, but did set a proposed maximum aggregated offering price of $110 million.
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The S-1 paperwork filed late on July 6 is the first part of a multistep process for going public where companies will provide estimates on how much they’re hoping to raise and the share price closer to the date of the official public offering, which in this case is expected to be sometime toward the end of this month.
But the document did provide a peek into the finances of the brand marketing firm.
In 2020, ABG’s total revenues were nearly $489 million, up from more than $480 million a year earlier, or $165 million in 2016, most of which came from licensing revenues over the last five years. The company made more than $225 million in 2020 as a result, up from $96.5 million in 2019.
It also said that based on a review of potential industries it can expand into, it estimates the total market opportunity for ABG is about $13 trillion in gross market value at retail in the future.
Outside firms BlackRock, Leonard Green & Partners, General Atlantic, Simon Property Group and Lion Capital own more than 5 percent of the company. So does chairman of the board and chief executive officer Jamie Salter, president and chief marketing officer Nick Woodhouse, chief financial officer Kevin Clarke and chief operating officer Corey Salter, one of Jamie Salter’s sons.
Last year the CEO received nearly $44 million in total compensation, including a base salary of $1.7 million and nearly $35 million in stock options.
In a management discussion section of the 194-page document, the company described itself as an “asset-light…brand development, marketing and entertainment company” that owns the intellectual property and receives licensing revenues from its portfolio of 32 brands that generated about $10 billion in annual revenue for the year ended Dec. 31, 2020. Among its holdings are Nautica, Brooks Brothers, Barneys New York, Spyder, Aéropostale, Forever 21, Lucky Brand, Eddie Bauer and Sports Illustrated.
Since its founding by Jamie Salter in 2010, ABG has made over 30 acquisitions, including 19 over the past five years, according to the document. But even ABG was not immune to the effects of the pandemic.
“Between 2015 and the first quarter of 2021, we achieved an organic growth median of 7.6 percent, driven by the strong performance of our existing brand portfolio,” the document detailed. “In 2020, we experienced an 8.8 percent decline in organic revenue growth due to the impacts of COVID-19; however, this decline was offset by an increase in licensing revenue that was largely contributed by brands we acquired in 2019 and 2020. We leverage the strong consumer recognition and attractive positioning of our brands through a global network of 1,000 licenses across approximately 800 licensees, including manufacturers, distributors, wholesalers, retailers and e-commerce partners, to help drive organic growth in our business. In 2020, 79 percent of our licensing revenue came from North America, while 21 percent came from the rest of the world.”
ABG operates in 136 countries and is in the “early stages of establishing a large footprint” in international markets where it sees significant growth opportunities, it said.
All told, licensing revenue accounts for over 70 percent of the company’s adjusted EBITDA, or $13.5 billion in sales in 2019 and $9.7 billion last year, it said. Lifestyle brands represented 82 percent of revenue last year and 85 percent for the three months ended March 31, 2021.
E-commerce sales through its licensees, which ABG called “an area of strong growth for us,” represented 18 percent of sales in 2020.
The entertainment arm of the business — a category Jamie Salter has identified as a major source of future growth because of their long- and short-form content, live events, hospitality and immersive experiences — represented about 18 percent of revenue in 2020 and 15 percent in the three months ended March 31 of this year.
Looking ahead, the company said it will continue to seek out brands that are “powerful and have enduring global appeal; exhibit meaningful organic growth potential, and are synergistic to our existing portfolio of brands.” As reported, ABG is in the running to purchase the Reebok brand from Adidas, as are a number of private equity firms, and the winning bidder is expected to be finalized before the end of this year.
The document revealed that ABG now owns a 50 percent stake in SPARC, its partnership with Simon Property Group and its largest licensee. At the end of 2019, ABG had owned 27.15 percent of SPARC but increased that stake by buying out Brookfield Properties’ interest for $30.4 million in January 2020. SPARC operates Nautica, Forever 21, Aéropostale, Lucky Brand and Brooks Brothers and generated $2.6 billion in global sales in 2020 — 7 percent of ABG’s total revenue — and $850 million through the first three months of this year, or 11 percent of total revenue.
The document said ABG plans to use a portion of the net proceeds from the IPO to pay off debt and “fund brand acquisitions,” primarily in the lifestyle and entertainment space. Other plans for the future include introducing its brands into new distribution channels in which its current licensees do not operate. As an example, ABG pointed to Shaq’s Fun House, a recurring party hosted by the company’s Shaquille O’Neal brand at major sporting and entertainment events such as the Shaq Bowl at the 2021 Super Bowl.
It also plans to launch a loyalty membership program that would include brands throughout its portfolio to offer customers discounts and perks for a monthly subscription price, and also offer a co-branded credit card.
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