Patriarch Snaps Up Another Brand Name Biz

Target: Spiegel Brands

Buyer: Patriarch Partners

Seller: Granite Creek Partners

Distressed buyout firm Patriarch Partners continues to target the battered remains of well-known brand names. After making a minority investment in the maker of AriZona Iced Tea, taking Stila Cosmetics off the hands of Sun Capital Partners, and losing a battle to purchase Polaroid Corp., the firm has inked a deal to buy Spiegel Brands, an online and catalog apparel retailer, from Granite Creek Partners, a Chicago-based buyout firm, for an undisclosed price.

The all-equity deal was announced on June 18, a day after Spiegel Brands’s former sister business, Eddie Bauer Holdings, filed for bankruptcy protection. Eddie Bauer and Spiegel Brands went the same route in 2003, emerging more than a year later as separate companies. Patriarch Partners’s CEO Lynn Tilton told Buyouts the firm is not likely to place a rival bid for Eddie Bauer, which has agreed to sell itself to CCMP Capital for $202 million, because the company is too retail-oriented for the firm’s taste.

Despite Patriarch Partners’s aggressive deal-making activity this year, the firm’s deal for Spiegel Brands began passively. The deal was initiated by Spiegel Brands’s lenders, Tilton said, because “they know what kinds of deals we do.” Wells Fargo, a major debt provider to the Granite Creek Partners-backed company, wanted to exit the credit. As is typical in 90 percent of Patriarch Partners’s deals, the firm purchased the assets of the business with a separate entity, allowing the creditors to force the existing entity into foreclosure.

Patriarch Partners’s acquisition of Stila Cosmetics from Sun Capital Partners in April was structured similarly. Sun Capital sold the assets of Stila Corp., its holding company, to a new Patriarch Partners holding company called Stila Styles. Recently, creditors of the former holding company forced that entity into bankruptcy. Tilton said Patriarch Partners’s operating company, Stila Styles, has been profitable since the investment closed.

Tilton said Patriarch Partners intends to cross-sell Stila Cosmetics products, as well as products from portfolio companies such as eyewear maker 180s, and housewares maker Croscill, through Spiegel Brands’s platforms.

Patriarch Partners plans to emphasize the business’s e-commerce business, which makes up around 65 percent of annual sales. “The catalog business has already been scaled back, and we would prefer it to be more of an online business,” she said, adding that the firm has no immediate intention of discounting catalogs altogether.

Patriarch Partners purchased Spiegel Brands with cash from its third fund, Zohar III, a $1.2 billion pool that’s around 80 percent invested. The firm is likely to return to market with a new fund in September of this year, she said.