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Iconix Now Holds 100% Stake in JV

Zacks Equity Research

Clothing brand licensing company Iconix Brand Group Inc. (ICON) has acquired the remaining 50% interest in Iconix Latin America from its joint venture partner, New Brands Group, S.A. for $42 million in cash. Iconix had formed Iconix Latin America in Dec 2008 with 50% stake in the joint venture.

The decision to acquire the remaining 50% interest in Iconix Latin America comes at the right time when the business in the region is growing impressively. Since 2008, the company’s royalty revenue from its iconic brands has increased fourfold in the region, particularly in Brazil, Mexico, Chile and across Central America.

Iconix seeks to monetize its brands through these international joint ventures, which have contributed meaningfully to the company’s revenues. Besides Latin America, the company has formed seven international joint ventures since 2008. In 2013, the company formed four new international joint ventures in Canada, Australia, Southeast Asia and Israel. Other previous joint ventures include Iconix China, Iconix Europe and Iconix India.

New York-based Iconix has also acquired a number of brands and formed domestic joint ventures in the recent past. The most recent and accretive acquisitions were of Lee Cooper (Feb 2013) and Umbro brands (Dec 2012). In Feb 2013, the company also formed a joint venture with Buffalo International and expanded its portfolio into Canada.

The company also purchased an approximately 14.4% minority interest in Complex Media, a multi-media lifestyle company and owner of Complex magazine and its online counterpart, Complex.com in Sep 2013. In Jul 2013, the company purchased a 10% minority interest in Marcy Media, which is a multi-media portfolio company. In May 2013, Iconix acquired the remaining 49% interest in IP Holdings Unltd LLC ("IPHU") and owns brands such as Ecko Unltd. and Marc Ecko Cut & Sew.

With these joint ventures and global brands, the company’s international business contributes 37% of the total business, up from 24% in 2012. For 2014, the company expects revenues from its non-consolidated joint ventures to be approximately $44 million.

We remain impressed with Iconix’s strategic acquisitions and consistent expansion of licensing agreements. Iconix expects to explore additional opportunities and enhance its portfolio with more iconic brands in the upcoming quarters. Iconix holds a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Investors interested in the consumer discretionary sector include Hanesbrands Inc. (HBI), Joe’s Jeans Inc (JOEZ) and Michael Kors Holdings Ltd (KORS), all with a Zacks Rank #1 (Strong Buy).

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