Li & Fung Ltd. and Jimlar Corp. are banking on each other’s expertise to expand its global reach in the footwear market.
After Li & Fung’s acquisition of Jimlar last week, execs from both companies told Footwear News that the firm is being positioned as the Hong Kong sourcing giant’s “footwear platform” in the United States. “From a U.S. perspective, we’re really satisfied that we now have the right place to put a stake in the sand in the footwear category,” said Rick Darling, president of LF USA, a subsidiary of Li & Fung.
Darling would not disclose the value of the Jimlar acquisition, but according to Jimlar co-president Larry Tarica, the Great Neck, N.Y.-based firm’s revenue is expected to hit approximately $540 million this fiscal year.
Li & Fung still has about $1 billion in its acquisitions war chest, but Darling said the group is not looking to acquire other footwear firms but could, “some day [look to] different types of footwear categories, to build off this platform.” The company has been active in the M&A front of late, taking on seven acquisitions and four licensing deals since the beginning of the year.
The partnership was first broached four years ago, when the Taricas and Darling were introduced by MMG’s Andrew Postal, who served as the advisor on last week’s deal. But the timing wasn’t right then, the executive said, and the real discussion restarted six months ago.
“We never marketed ourselves for sale. But we had important goals in investing in our people and our culture, and broadening our global scope,” said Larry Tarica. “It became clear to us that LF USA was the perfect fit [because] we could remain largely intact as an organization, and not be merged into a broader platform.”
Jimlar, which owns the Frye trademark and licenses for Coach and Calvin Klein footwear, expects the management transition to be smooth as it closes the deal with its new parent over the next month. The initial five-year agreement has retained Larry and Jim Tarica, who until last week served at Jimlar’s chairman and CEO, as co-presidents. Other top executives, including President of Brands Jim Gabriel and President of Private Brands Tom Tarica, will remain in those roles.
“This is rich in its people and expertise,” said Darling. “On the back end though [is where] we are looking to collectively create an operating platform to support [each other]. For all intents and purposes, Jimlar stays exactly as it [was].”
FN: Why was now the right time for this deal?
RD: Footwear was a piece that we needed at LF USA to round out our non-apparel offering, and Jimlar was always on our mind. We resurrected our previous discussion [with the Taricas] about six months ago and concluded this time around that we really have the potential to put a deal together.
FN: What was it about Jimlar that was so appealing to LF USA?
RD: We were looking for a footwear company that had an important, scaled position in the marketplace and a very well respected brand management capability. We needed management that was prepared to stay and continue to run the business, and teach us about the footwear business. We were looking for excellence in terms of sourcing capabilities, because we didn’t feel that our sourcing platform was as strong as it needed to be. We were looking for solid retail relationships. With Jimlar, I can check the boxes on every one of [those criteria].
FN: What are Li & Fung’s plans to expand Jimlar’s brands into Asia and across the globe?
RD: Asia is a major focus, [and] we’ve particularly looked at Frye as [having a] huge opportunity to expand in Asia as well as Europe. LF Europe is [also] now established to assist us on the ground, and Jimlar has [excellent] relationships in Italy and Switzerland. The timing [for expansion] is quite right, [though we have] no particular timeframe in mind. Once this transaction closes [over the next month], we’ll begin talking about that almost immediately.
FN: How does the deal affect the Tarcia family’s role in the business?
JT: Both Larry and I have children involved with the business, and I hope someday my grandchildren will be in the company. It was very important to us that we felt would maintain our culture and be the right fit, not only for our families, but also for those of our employees and associates. One of the nice things is that we [are retaining] the Jimlar name and hope that will continue for a long time.
FN: What will Li & Fung, as a large public company, help you do?
LT: While they’ve been kind enough to say we’re best in sourcing footwear, we’re confident we’re going to learn things from them on supply chain and be able to utilize the breadth of Li & Fung’s operations in many parts of the world and deliver better products and value to our customers. And while we’ve always invested in new opportunities with a level of assertiveness, clearly Li & Fung’s attitude about growth and investment in new businesses will enhance our ability to think through those opportunities in a bigger and broader way.
FN: Are there plans to develop other footwear brands under the Jimlar umbrella?
RD: [Yes,] we’ve got a number of [new brands and licensing opportunities] that are in the development stages that would be perfect for Jimlar.
FN: How will this affect the licensing deals in place with Coach and Calvin Klein?
LT: Those relationships will stay intact, and we’re very happy that [those brands] continue to support what we’re doing on their behalf. Now we can be in an even better position to deliver future service and nourishment of their brands.
FN: Is there a plan for expanding Frye into a lifestyle brand beyond footwear?
LT: That’s the kind of discussion we can now have in a more purposeful way. Until this point, we had the intention for Frye to be luxury leather goods [business]. Now, as part of LF USA, we can talk about whether we believe [other] categories should be developed.
RD: Theoretically, Frye could go outside of footwear and leather accessories, but I’m not a believer that every brand should be a lifestyle brand. If [we decide] Frye can and should be one, we’ll make that decision together.