Li & Fung fashion spin-off Global Brands Group sells North American businesses for US$1.4b

Global Brands Group (GBG), the fashion firm spun off from supply chain giant Li & Fung, will sell a significant part of its North American licensing business to Nasdaq-listed Differential Brands Group for US$1.38 billion to cut debt.

Chief executive Bruce Rockowitz said the asset disposal was aimed at reducing debt and lowering working capital. The company had a net debt of US$1.1 billion and gearing ratio of 40.6 per cent as of March 2018, much of it left behind from its 2014 spin-off.

“The divestment will improve our balance sheet and simplify the company, and is good value for shareholders,” said Rockowitz. “GBG will continue to be a global company and somewhat less reliant on the US, and more equally diversified going forward.”

The assets to be sold, valued at a total of US$1.28 billion, comprise all of its North American childrenswear and accessories businesses, and a majority of its West Coast and Canadian fashion operations. Among them is the label BCBG Max Azria, which GBG acquired last year for US$27.4 million after it filed for bankruptcy.

The company aims to close the sale by August 31, subject to shareholders’ approval.

The sale price of the assets is also more than half of their 2018 sales revenue of US$2.2 billion. They will be acquired by US fashion brand licensing firm Differential Brands Group, which Rockowitz described as similar to GBG but on a smaller scale.