New Era Cap, LLC is reportedly talking to law firms and investment banks as part of a plan to go public next year, according to Reuters. The IPO comes after fourth-generation company leader Chris Koch stepped down last fall from daily operations as private equity firms bought a significant stake in the headwear manufacturer.
The IPO could value Buffalo-based New Era in the range of $4 billion to $5 billion. The Koch family has privately owned New Era since its founding in 1920, with the family remaining majority shareholder.
New Era’s earnings before interest, taxes, depreciation, and amortization (EBITDA) may reach or surpass $300 million in 2023, Reuters added. New Era generated more than $1 billion in revenue in 2022, according to Bloomberg.
Acon Investments, a Washington, D.C., private equity firm, holds a significant minority stake, first acquiring between 15 percent to 20 percent of New Era in February 2022. The sale marked New Era’s first private equity investment in the 103-year-old company’s history.
In August 2022, Acon expanded its holdings with a $700 million deal that brought in other investors, including Major League Baseball, the National Football League and the National Basketball Association.
New Era is the headwear license partner for the top three U.S. sports leagues. With the private equity deal, the MLB, NFL and NBA each became minority shareholders in New Era, though private equity firms largely drove the deal.
Kevin Wilson, EVP and CFO of New Era told Reuters that the company “is always considering alternatives to position the company financially for future growth, but we have no strategic plans to share at this time. We don’t comment on speculation.”
Last Thursday, Koch told Bloomberg that New Era had secured a $600 million refinancing loan from banks co-led by BofA, JPMorgan and Citi. The overall debt package is $775 million, comprising a $525 million term loan and $250 million revolver.
“The commitments that we received relative to our debt package exceeded by over 40 percent,” Wilson told Bloomberg. “So we’re pleased that people have the confidence in New Era and liked what they saw from a financial profile to invest in us.”
Koch told Bloomberg the refinancing now offers added liquidity flexibility. Koch declined to speculate on IPO plans, but also inferred that he has no plans to step away from the company.
“I’ve got a lot of gas in the tank,” Koch said, when asked about the company’s future path. “I can see myself leading a publicly-traded company,” he added.
In October 2022, Koch stepped down as president, leading day-to-day operations, but retained his title as CEO. According to a company news release, he focuses on merger and acquisition opportunities, board governance and long-term and succession planning.
Koch had been president since 1993 and took over as CEO in 2002 following the death of his father, David.
Taking over day-to-day operations for Koch were longtime New Era executives Jim Grundtisch and Jim Patterson. Both men now serve as co-presidents.
Grundtisch, who was mainly been responsible for building New Era’s global operations in South America, Europe and Asia over the last two decades, became New Era’s president of global brand. Until his promotion, Grundtisch was, most recently, New Era’s executive vice president and chief revenue officer.
Patterson, who was previously executive vice president and chief operating officer, became president of global operations. In his former role, he helped steer the company’s business operations through a series of expansions and challenges, which, in recent years, included the closing of the company’s longtime Derby, NY manufacturing plant, the layoff and rehiring of employees during the pandemic and the company’s private-equity deals.
Chris Koch earns credit for elevating New Era into a lifestyle brand. He was instrumental in securing New Era’s first deal with Major League Baseball to become the exclusive supplier of on-field caps for the league, a first for the industry.
The New Era branded “flag” first appeared on all New Era headwear in 1998 and the cap has become a fashion statement. Celebrities often wear New Era’s flagship 59FIFTY cap on runways and red carpets. The 59FIFTY cap was launched in 1954 and has been customized for select teams in MLB, the NFL and the NBA. Collaborations with luxury names like YSL and Fear of God have added more fashion cachet to the New Era brands in recent years.
In 2009, Koch’s strategy to expand New Era beyond headwear led to the acquisition of 5th & Ocean, a women’s apparel company based in Miami, and Marc4, a lifestyle brand in Brazil. The company now designs, markets and distributes more than 200 pieces of headwear and apparel each year.
Moving beyond baseball, New Era in 2012 became the official sideline cap of the NFL, and, in 2016, became the official on court cap of the NBA; making New Era the only brand in sports history to have exclusive on-field, sideline and on court headwear rights for all three major U.S. leagues simultaneously.
The brand because the official outfitter for the Canadian Football League starting in the 2019 season. New Era also has relationships with universities, soccer teams, motosports and the Ryder Cup in golf.
Koch has also spearhead New Era’s international expansion with the opening the brand’s first offices outside of the U.S., in Canada, at the turn of the millennium and the subsequent opening of offices in Europe, Japan, and Australia, all within a two-year span. The company is now in 100 countries globally.
Opening up stores had been a growth vehicle for the brand with the opening of its first flagship store in New York City’s SoHo district in 2006 and subsequent openings in Buffalo, Chicago, Atlanta, New Orleans, Los Angeles, and Toronto but only the store in its hometown of Buffalo remains open in North America. It continues to operate a flagship on Carnaby Street in London but has closed several flagships in Europe as well.
The New Era speculation comes as reports arrived last week that Amer Sports, the parent of Wilson, Arc’Teryx, Salomon and other sports brands, is targeting an IPO in early 2024 that could value the company at up to $10 billion.
Photo courtesy New Era