Two years ago Bob Corliss and the management team from The Athletes
Foot acquired the company from the French holding company,
Rallye Group, and subsequently worked to turn the ailing retailer and
franchisor around. Shortly after the acquisition, the company declared
bankruptcy in an effort to divest its unprofitable company owned
stores and return to its original franchise-only business model.
Now the franchisor is set to change hands once again as Aether Holdings
has acquired the company in a stock plus cash deal. Aether will
change its name to NexCen Brands as it changes its model on its intellectual
property-centric business in industries such as consumer
branded products, franchising, and media and entertainment and will
divest its mortgage backed securities business. This could give Nex-
Cen a considerable amount of capital for future acquisitions. The MBS
portfolio carries a fair market value of just under $90 million and NexCen had $29.6 million in cash on their balance sheet at the end of Q2.
The initial purchase price is $51.5 million, which was based upon a
5.6x average trailing twelve months of royalty revenue multiple and
an EBITDA multiple of 9.2x. That would put royalty revenues at $9.2
million and earnings at $5.6 million. The initial purchase price will be
funded with a combination of cash and stock. The stock component is
18.4% or $9.5 million of the initial purchase price, which may increase
on a pro rata basis with the cash component if the earn-out is
achieved. The EBITDA and revenue multiples will remain constant
until the end of the year, so of Corliss and the TAF management team
improve upon these two key metrics, the earn-out could increase up
to an additional $8.5 million in consideration.
Aether already had a relationship with The Athletes Foot through their
wholly-owned subsidiary, UCC Capital Corp, which has provided strategic
advice to TAF over the last four years. UCC had completed a
Whole Company Securitization for The Athletes Foot, which will be
satisfied at closing with a portion of the purchase price going towards
the debt.
During a conference call with analysts, NexCen President and CEO Bob
DLoren said that NexCen will be looking for additional acquisitions in
the sporting goods industry. Specifically, the company will be looking
for branded apparel and hardgoods companies that can be sold
through TAF franchisees. “Ideally, we would seek consumer brands
that are synergistic with The Athlete’s Foot. Activewear type brands,
brands where we could sell products that would represent a good
product mix with The Athlete’s Foot customers,” DLoren said. “Ive
said in the past Im not the kind of person that lets grass grow under
my feet and I have a great team of people around me and I will focus
on moving forward and growing this business.”
NexCen not only sees additional synergistic acquisitions as an opportunity,
but also sees a large amount of potential for organic growth.
NexCen will be implementing a plan with TAF management over the
next 60 days to improve marketing, make operational improvements,
and “potentially” look at some co-branding opportunities.
The Athletes Foot currently works with 575 stores doing business in
40 countries with a major presence in the U.S., Mexico, Canada,
Europe, Asia, the Middle East and the Caribbean. There are just fewer
than 200 stores in the U.S. NexCen will pick up all 12 TAF employees
based out of Atlanta, including Corliss, who is expected to take the
lead in NexCens franchising operations.
