Trimaran Capital Partners acquired an undisclosed majority stake in Urban Brands Inc., a retailer of plus-size women’s apparel. The firm invested $20 million of equity in the company to gain the control stake, while existing investor, TSG Capital Group, will retain a significant ownership position.
“We typically won’t make many $20 million investments,” Trimaran Managing Partner and Co-Founder Dean Kehler said. “Our bite size is generally in the $50 million to $100 million range, but we’ll make a smaller investment if we think a company has more growth potential.”
Urban Brands is comprised of the Ashley Stewart and Marianne plus-sized retail brands. Ashley Stewart controls 170 stores located throughout the U.S., while Marianne runs 55 stores, 48 of which are based in Puerto Rico. The company generates roughly $200 million in annual revenue.
“With our investment, Urban Brands will be able to reduce debt and fund new growth,” Kehler said. “We’ve been interested in retail for a long time, but we found it difficult to find a company with a really defined and unique strategy. These brands serve a very specific customer, that’s why this investment, in particular, is so appealing to us.”
The investment will be funded in up to four separate closings. The first close, totaling $13.5 million, occurred on April 19, 2004. Ethan Shapiro, chief executive of Urban Brands, said, “The financing allows us to increase store locations, remodel existing stores and flow fashion on a more timely basis.” Company management also contributed to the $20 million investment.
By focusing on the plus-size market, Urban Brands is targeting a space with a growing demographic, as more than half of adult women now wear size 12 or larger. J.P. Morgan, in a research note to clients, said, “The plus size market (which accounts for about 46% of women 18 years and older or 47 million women) continues to outpace women’s apparel growth.”
However, while those trends are certainly appealing, it is exactly the growth of the market that some fear could attract the mass merchants and other clothing retailers. J.P. Morgan, in the same note, continued, “There is a real threat that the likes of department stores and mass retailers, which have the most clout among designers and vendors, begin to utilize pricing and well known brands as a tool to chip away share of [the plus-size] market.”
Already such names as Wal-Mart, Target and JC Penney, as well as specialty retailers Chico’s, J. Jill, Talbot’s and Coldwater Creek, among others, have started catering to the plus-size consumer.
Urban Brands, to help combat the new entrants in the market, has restocked its management team in the past year. At the end of 2003, the company installed Shapiro as CEO, replacing Bob Bland. Shapiro had previously held senior management positions with Urban Brands rival Lane Bryant, as well as the Limited Stores. The company also brought on board Stephen Feldman as CFO, who has held the same position at Urban Outfitters, One Price Clothing Stores and Bradlees. Additionally, the company hired former Limited Stores and Lerner New York CEO Robert Grayson as a senior advisor, and has since added him to the board of directors.
“For a company that would still be considered relatively small, this is really a very high-powered management team,” Kehler said. “They have significant experience in urban retailing, and each brings to the table specific merchandising and marketing talents.”
Trimaran used its $1.04 billion Trimaran Fund II for the investment, which is now roughly two thirds invested. A source has told Buyouts that the firm will likely begin a new fund-raising effort for Fund III in the fall, although Kehler would not comment on the rumors.
Buyers: Trimaran Capital Partners
Target: Urban Brands
Legal Counsel: Trimaran: Cahill Gordon & Reindel LLP; Urban Brands: Foley Hoag & Eliot LLP