Delta Apparel Inc. completed the sale of its vintage-inspired, licensed-graphics tee business, Junkfood Clothing Company, to JMJD Ventures, LLC for approximately $28 million, subject to a final tangible asset adjustment. The asset sale proceeds include $25 million in cash at closing, with promissory note payments due between June 30, 2017, and March 30, 2018, for the remaining amount.
The transaction does not include the sale of accounts receivable and certain other assets, or the assumption of trade payables and certain other liabilities. The approximately $35 million total value of the business sold exceeds its book value and represents approximately 80 percent of Junkfood’s revenue. Net of selling expenses, Delta Apparel expects to realize a pre-tax gain of approximately $1.0 million on the sale, which would be recorded in its 2017 fiscal second quarter.
Delta Apparel’s chairman and chief executive officer, Robert W. Humphreys commented, “The Junk Food brand has broadened its consumer reach and awareness, and more than doubled its revenue since we acquired it in 2005. While we have enjoyed nurturing this brand over the years, the changing retail environment has made it more challenging to be a niche player in the licensed-graphics space. We are pleased to have the opportunity to sell Junk Food and further reduce our reliance on licensed properties. We expect to use the proceeds from the sale to lower our debt levels, continue our share repurchase program and provide capital for further investments in strategic growth opportunities, including the Salt Life brand and Art Gun.”
According to Delta Apparel’s most-recent 10K filing, Junk Food emerged in 1998 as the original vintage t-shirt brand. Known for its soft, comfortable fabrics and witty art, the Junk Food brand is a celebrity favorite carried in the top stores throughout the world, including branded collaborations with Nordstrom, Gap Inc. and other notable retailers. Also a licensing powerhouse, JJunkfood has rights to distribute trademarked apparel across athletics (including the NFL and NBA), music, entertainment, foods and beverages, and numerous other pop-culture categories.
The Junk Food brand continues to expand beyond its iconic tee shirt collections with new apparel categories, accessories, and headwear, showcased in its flagship retail store on Abbot Kinney in Venice, CA. Junkfood’s diversified business model includes both private and branded labels, with a portfolio that includes Junk Food, Junk Food Art House, Wknd, Stray Heart, K38, Paint and Cloth, Worn Rite, Love + Art, and True Vintage.
Delta Apparel, Inc., along with its operating subsidiaries, M. J. Soffe, LLC, Salt Life, LLC and Art Gun, LLC, is an international design, marketing, manufacturing, and sourcing company that features a diverse portfolio of lifestyle basic and branded activewear apparel and headwear.
Photo courtesy Junk Food
