Isaac Mizrahi Brand Sold to WHP Global in Deal Valued at $68 Million
Isaac Mizrahi, the brand with the big personality behind it, is aiming for another growth phase through new ownership.
Xcel Brands Inc. has sold a 70 percent stake in the Mizrahi brand to WHP Global, a brand management firm that’s been rapidly building up its portfolio, for $46.2 million in cash, valuing the Mizrahi business at $68 million.
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Xcel retains a 30 percent minority interest in the Isaac Mizrahi brand and continues to manage Mizrahi’s QVC business with WHP Global. Xcel has also entered into a new license agreement to design and distribute Isaac Mizrahi apparel in the U.S. and Canada.
Mizrahi continues to serve as chief design officer of his namesake brand. “I’m very excited to harness the power of my brand. I couldn’t ask for better partners,” he said in a statement.
The New York-based WHP Global owns Anne Klein, Joseph Abboud, Joe’s Jeans, William Rast, Toys “R” Us, Babies “R” Us and Lotto, the Italian sports apparel and footwear brand. The company also owns WHP+, a direct-to-consumer digital e-commerce platform for brands, and WHP Solutions, a sourcing agency in Asia.
“Isaac Mizrahi is an opportunistic, tuck-in acquisition to our fashion vertical which is well north of $1 billion in sales,” Yehuda Shmidman, chairman and chief executive officer at WHP Global, told WWD on Tuesday, when the deal was revealed.
Shmidman said the deal signals “the next phase of growth for the Isaac Mizrahi fashion house. We see meaningful opportunities to expand the brand by leveraging WHP Global’s platform and the reach of our fashion vertical.”
The Isaac Mizrahi brand includes sportswear, footwear, handbags, watches, eyewear, tech accessories, home and other merchandise. The brand sells at department stores such as Saks Fifth Avenue and Hudson’s Bay; interactive television, including QVC and The Shopping Channel, as well as at national specialty chains. It’s also sold overseas in Canada, Italy, the U.K. and Japan.
Executives involved in the deal estimated the Mizrahi brand through its 35-year history has generated more than $2.5 billion in sales, including about $1.5 billion during its five-year run at Target until 2009. The brand has had some fits and starts, but has recently been growing. It has maintained a prominent profile thanks to the personality of the designer who knows how to work a crowd and engage his audience, whether they’re at home watching him sell on QVC or getting up close at one of his store appearances — or past cabaret nights at the Carlyle Hotel in Manhattan.
After working for Perry Ellis, Calvin Klein and others, Mizrahi launched his own collection in 1987, later earning four awards from the Council of Fashion Designers of America. In the past, he’s dressed famous women including Michelle Obama, Oprah Winfrey, Audrey Hepburn, Meryl Streep, Rihanna, Julia Roberts, Anne Hathaway and others. Besides fashion design, he’s worn many other hats, as a cabaret performer, an actor in movies, a writer, singer, artist and TV talk show host. He starred in the documentary “Unzipped” and was a “Project Runway All-Stars” guest judge.
“We can really bring the brand around the world, to new international markets, which is what we’ve done with Anne Klein and Joseph Abboud, and what we are now doing with Joe’s Jeans and, of course, what we do with our other verticals with Toys ‘R’ Us and Lotto,” Shmidman said.
He said about 50 percent of WHP’s $4.25 billion business is outside the U.S. “We have a really diversified global business. We have now over 125 licensees. We are very deep across Europe and Middle East, very deep in Asia and deep in Latin America. We could definitely see Isaac’s brand in China, Japan, [South] Korea, through [more] parts of Europe and the Middle East.”
Asked to characterize how recognized the Isaac Mizrahi brand is outside the U.S., he replied, “It’s mixed. We have work to do with certain markets to tell the narrative. But there are certain markets that really know him.”
Robert W. D’Loren, chairman and CEO of Xcel Brands, discussing the rationale for selling Isaac Mizrahi, told WWD, “This is the time. We’ve been at it for 11 or 12 years. Our job here is to create value, create value in our brands and create value for our shareholders and for the other stakeholders including our employees. This was a perfect time to realize a capital markets event.
“It’s not that we think there is no more growth with the brand,” D’Loren added. “Quite the opposite. We do think there are international opportunities. We like the footprint that WHP has globally. It’s better than ours. Our global footprint is in interactive TV only. With all that is going on in the world, this is a very smart time to be de-leveraging our balance sheet. We are taking our debt down to zero.”
D’Loren said there are about 50 licenses under the Isaac Mizrahi name. “It’s a robust licensing portfolio from apparel to footwear to handbags and many ancillary categories we have licensing partners with.…When we acquired Isaac Mizrahi, it was generating about $30 million in retail sales. Today, it’s nearing $400 million.”
Going forward, Xcel will introduce an Isaac Mizrahi dress collection, which doesn’t exist today.
Gilbert Harrison, chairman of Harrison Group, stated, “WHP’s acquisition of a 70 percent interest in the Isaac Mizrahi brand certainly leverages their existing platform and presents a great opportunity for them. However, as a consultant and financial adviser to Xcel Brands, this transaction presents an exceptional opportunity for Xcel Brands. One must realize that the equity value of Xcel before the announcement was three and a half times less than the full valuation of the brand and Xcel not only retains at 30 percent interest in this brand, but also now has the liquidity with no debt and excess working capital which will enable them to focus on building their existing brand portfolio which includes, among others, Halston, Judith Ripka, Lori Goldstein, C Wonder and also Longaberger which has allowed Xcel to build its expertise in digital livestreaming shopping.”
Xcel’s shares were trading at $1.16 on Nasdaq before the announcement of the deal, giving the company a market capitalization of $22 million.
Shmidman cofounded WHP in 2019 with Oaktree, in conjunction with the purchase of Anne Klein, WHP’s first brand acquisition. “We brought in Black Rock after. We’e got other backers as well,” Shmidman said.
WHP is a direct competitor of Authentic Brands Group, another major brand management firm.
“We are purchasing brands that are already great. We are not inventors” of brands, Shmidman explained. “We are investing in expanding the distribution of those brands around the world with partners across the planet. We look at fashion opportunities every day of the week, maybe except for Saturday. We are absolutely in the market for other fashion acquisitions.
“Look to us to close another acquisition this year,” Shmidman added. “It could actually be a new vertical. We look at bolt-ons and new verticals. We’ve got more than $100 million in liquidity on our balance sheet, after this deal. We’ve got a lot of fire power to invest in amazing brands that still have opportunity for growth.”
WHP’s last acquisition was Joe’s Jeans. “We are moving very quickly. We’ve got an awesome team and some very serious capital behind us. We are definitely thinking big. This is our time to be very active, to place our investments in brands that are not going away. We have the ability to move super quick.”
Meanwhile, Xcel is not considering monetizing other brands. “Not now,” D’Loren said. “It takes time to really build brands, to where we think it makes sense to consider that.”
The deal leaves Xcel with over $17 million in cash and $22 million of working capital on its balance sheet, D’Loren said.
“Right now we are very focused on Halston. It’s doing extremely well. Netflix was a big game changer for us in terms of generating awareness for a new generation,” said D’Loren, referring to the Netflix series on the designer.
“We are also very focused on our C. Wonder brand,” D’Loren added. “You will be hearing an announcement soon, on retail commitment and a celebrity designer getting behind it.”
The company is also investing in livestreaming and also owns Judith Ripka, and Logo by Lori Goldstein, as well as a minority stake in the Isaac Mizrahi brand. It also owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing LLC. The company’s brands have generated in excess of $3 billion in retail sales via livestreaming in interactive television and digital channels alone.
