Sequential Brands Group, Inc. has signed a definitive agreement to acquire Galaxy Brand Holdings, Inc. for $100 million in cash, 13.75 million shares of common stock of the company, and certain performance based warrants.
Sequential Brands Agrees to Acquire Galaxy For $100 Million Plus Stock and Warrants
The acquisition will transform Sequential into one of the largest pure-play brand licensing companies in the world, with a portfolio of twelve global consumer brands generating nearly $2 billion in global retail sales annually. The transaction, which is expected to close by the end of 2014, is subject to customary closing conditions and regulatory approval.
In the transaction, Sequential will acquire four well-known consumer brands that include the fitness brand Avia, basketball brand AND1, outdoor brand Nevados, and home goods brand Linens 'N Things.
Galaxy currently has over 15 licensees with significant business at Walmart coupled with complementary distribution to a wide range of mid-tier and specialty retailers.
“This merger is a game changer for Sequential, as it doubles the scale of our brand portfolio and further diversifies our licensee and distribution platform,” said Sequential CEO Yehuda Shmidman. “We were attracted to these four brands for both their existing licensing base as well as the strong prospects for continued organic growth in the future.”
“We are thrilled that this acquisition also brings the expertise of Eddie Esses and the Galaxy team, who will continue to lead the business for the newly acquired brands,” added Shmidman.
On a combined basis post-closing, the company is projecting forward 12-month royalty revenues of $56 – $60 million and $36 – $40 million of Adjusted EBITDA from the total brand portfolio of 12 brands.
“I am excited about building upon Sequential's success and continuing to expand and strengthen our brands,” said Esses, who serves as CEO of Galaxy Brand Holdings. “The combination of our brand portfolios together as one unified force is very powerful.”
Global alternative asset manager The Carlyle Group, which has a majority interest in Galaxy, will be granted one seat on Sequential's board of directors and will become a significant shareholder in the company post-transaction.
“The roadmap and execution playbook outlined approximately two years ago has been followed aggressively,” said William Sweedler, Chairman of Sequential. “I'm very proud of the Sequential management team and look forward to Rodney Cohen, Managing Director and Co-Head of Carlyle Growth Partners and Carlyle Equity Opportunity Fund, joining the Board of Directors.”
The company has obtained committed financing from Bank of America and GSO Capital Partners LP, an affiliate of Blackstone Group. The company will be replacing its existing debt facilities with new first lien and second lien debt facilities totaling approximately $180 million. Additionally, upon completion of this transaction, the company's diluted share count will be approximately 40 million. The transaction is expected to close by the end of 2014, and is expected to be immediately accretive.
The deal team that represented Sequential during the acquisition was led by Tengram Capital Partners. Consensus Advisors provided a fairness opinion to the Board of Directors.
Further details will be provided upon closing.
Sequential Brands Group, Inc. owns, promotes, markets, and licenses a portfolio of consumer brands that presently includes William Rast, People's Liberation, DVS, Heelys, Caribbean Joe, Ellen Tracy, Revo and The Franklin Mint. The has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and in certain international territories.