The athletic giant sold the brand to Apax Partners for $570 million on Friday, representing a purchase price higher than its 2011 revenue of $535 million, or about 2 percent of Nike’s total business. Relative to its bottom line, insiders estimate the price is between 11 and 12 times EBITDA, which makes the deal expensive.
“We know that the business has been more challenged of late, so the fact that they can get a multiple [of more than 1.0 times its revenue] for a branded/retail business is pretty good,” said Christopher Svezia, analyst at Susquehanna Financial. “It’s nice the brand is no longer a drain on [Nike’s] profitability, and they can move on now.”
“It’s an exceptionally aggressive price for a brand that has tremendous recognition but that has lost some of its DNA,” said Gilbert Harrison, founder and chairman of Financo Inc., which was at one point advising a firm in the sale process. “A lot of work has to be done.”
Another observer described it as “crazy” for Apax to think they might be able to exit the business in five years at the same multiple they paid for it.
Sources in the industry who believed TPG Capital was also in the running until the late stages of negotiation said the investment firm, led by Matt Rubel, former CEO of Cole Haan and advisor to the funds, ultimately found the price too rich for its blood.
Meanwhile, Apax has teamed up with Jack Boys, who was a former CEO of Converse, another Nike-owned brand. Boys has been credited with turning Converse from a $150 million skate business into a $1 billion global lifestyle brand.
Insiders told Footwear News that plans for Cole Haan under the new owner involve adding apparel lines for both men and women, and possibly diffusing it. The brand currently has footwear, leather goods and outerwear.
Apax Partners declined requests for further comment until the deal closes early next year.
But Alex Pellegrini, a partner in Apax’s retail and consumer team, said in a statement, “We are excited to partner with Jack to grow the Cole Haan brand in the U.S. and internationally. Cole Haan is an iconic brand with broad consumer appeal and we believe the brand has even greater opportunities in the future.”
Apax’s previous experience with fashion and footwear acquisitions include Tommy Hilfiger Corp., Calvin Klein, Tommy Bahama, Dollar Tree Stores and The Children’s Place.