Authentic Brands Group (ABG) is shelving its planned initial public offering and instead plans to sell significant equity stakes in its business to private equity firm CVC Capital, hedge fund HPS Investment Partners and a pool of existing stakeholders. The transaction values the company at $12.7 billion in enterprise value.

The company had filed for an IPO in early July and was reportedly seeking a valuation of about $10 billion.

The new transaction, expected to close next month, will give the two private equity firms seats on ABG’s board, the New York-based company said in the statement.

“We have known CVC and HPS for many years and are thrilled that they are coming on board as significant stakeholders in ABG. Their commitment is a testament to the exceptional work our team has put forth as well as CVC and HPS’s confidence in our future growth,” said Jamie Salter, Founder, Chairman and CEO of ABG, in a statement. “The entire ABG team – from our leadership to the director of first impressions – has done an incredible job of building a sustainable and scalable business with a laser focus on brand development, digital innovation, e-commerce, specialty retail, expansion into new verticals and proven business models.”

Speaking to CNBC, Salter said ABG will now target an IPO date in 2023 or 2024. He noted that he has signed on to be CEO for another five years.

“The IPO climate is ridiculous,” Salter told CNBC. “I think we would have gotten a massive valuation … maybe even more than what we sold the business for. But guess what? I’d rather be private.”

Salter told WWD the company will have more flexibility under private ownership. He said, “We’re free to do whatever we want. We just made a deal for Iconic Images last week and Reebok closes on Feb. 28. And we expect to make a significant acquisition before the end of the year.”

Salter further told WWD that half of the investors are new investors the half existing investors in the transaction. Salter remains the largest individual shareholder in the company, but the private equity firms have bigger stakes. All told, ABG’s management team retains around a 20 percent interest.

”The investors are taking money off the table,” he said, “which is normal for a private equity firm. They can either do it this way or through an IPO.”

Founded in 2010, ABG portfolio has grown to more than 30 brands that are diversified across the fashion, luxury, outdoor, home, entertainment, events, media and fine arts sectors. In the active lifestyle space, brands include Eddie Bauer, Izod, Greg Norman, Spyder, Tretorn, Tapout, Prince, Volcom, Airwalk and Vision Street Wear. Other high-profile properties include Brooks Brothers, Barneys New York, Juicy Couture, Vince Camuto, Van Heusen, Sports Illustrated and Forever 21.

The acquisition of Reebok, which closes in Q1 of 2022, will bring ABG’s portfolio to more than $20 billion in annual system-wide retail sales with global distribution in more than 150 countries and highlights ABG’s ability to successfully integrate world-class brands into its unique platform.

In August, ABG reached an agreement to acquire Reebok from Adidas for a total consideration of up to €2.1 billion, or about $2.5 billion.

In its statement on Monday, ABG said the acquisition of Reebok, which closes in Q1 of 2022, will bring ABG’s portfolio to more than $20 billion in annual system-wide retail sales with global distribution in more than 150 countries.

“The investments from CVC Capital and HPS Investment Partners are a strong vote of confidence in ABG’s long-term vision and strategic approach,” said Nick Woodhouse, president and CMO of ABG, in the statement. “We are primed to continue furthering our global presence, acquiring new entertainment and lifestyle brands and driving organic growth for our portfolio.”

“We have followed ABG’s success story for several years and are delighted to be partnering with the company and its investor group,” said Chris Stadler, a Managing Partner at CVC. “The power of the ABG platform is evident in its growth to date, and we believe the company is only beginning to realize the full benefit of its scale and diversification. We look forward to working with Jamie, Nick and the talented team at ABG to create even greater value together.”

“ABG has shown that its unique business model can successfully innovate and grow brands across a broad spectrum of consumer categories, and we are excited to leverage CVC’s experience in the consumer, retail and media and entertainment sectors to support the company’s growth ambitions,” said Chris Baldwin, a Managing Partner at CVC. “We plan to work closely with the ABG team to execute on their strategic priorities, particularly around international expansion, given our extensive global footprint and experience in local markets around the world.”

“We are thrilled to partner with Jamie and his outstanding team, who we have known for nearly a decade, to support ABG’s ongoing development and growth strategy as it continues to lead the market in the brand licensing arena, underpinned by a highly differentiated and innovative acquisition and brand management platform,” said Scot French, a Governing Partner of HPS.

BlackRock Long Term Private Capital will retain its position as ABG’s largest shareholder, which it has held since 2019. Simon, General Atlantic, Leonard Green & Partners, GIC, Brookfield, Lion Capital, Jasper Ridge Partners and Shaquille O’Neal will continue to hold significant equity positions in the company.

In connection with the transaction, BofA Securities, Inc. was the M&A advisor for ABG. BofA Securities, Inc. and Goldman Sachs & Co. LLC also acted as financial advisors for ABG. Latham & Watkins LLP acted as legal counsel for ABG.

Upon closing of the transaction, which is expected in December 2021, CVC and HPS will join ABG’s Board of Directors.

When it filed to go public, Authentic Brands reported that its net income in 2020 jumped to $211 million from $72.5 million a year earlier, while its revenue rose about 2% to $489 million.

“We have the same playbook today as we had yesterday,” Salter told CNBC. “You’ll hear about more acquisitions by the end of this year.”

CVC recently struck a deal to buy Unilever’s tea business. Past CVC investments have included streetwear brand A Bathing Ape and pet goods chain Petco, according to its website. HPS spun out of J.P. Morgan Asset Management in 2016.

Photo courtesy Authentic Brands Group