Joe’s Jeans Inc. (NASDAQ: JOEZ) (“Joe’s Jeans”) and Hudson
Clothing Holdings, Inc., (“Hudson”), today announced that they have
signed a definitive stock purchase agreement under which Joe’s
Jeans will acquire privately-held Hudson.
The total purchase price for Hudson will be approximately $97.6
million, subject to certain adjustments, and will be payable in
cash and convertible notes issued by Joe’s Jeans.
Marc Crossman, President and Chief Executive Officer of Joe’s
Jeans, stated, “We are extremely excited about joining forces with
Hudson Jeans. Once the acquisition is complete, we expect to nearly
double the size of our business, meaningfully increase our
international and e-commerce penetration, and enhance our overall
prospects for growth. Paramount to the combination is preserving
the DNA of each existing company by retaining its employees and
separate facilities. This deal represents a landmark event in the
history of our company and we are committed to capitalizing on the
many opportunities this transformative transaction will create in
marketplace.” Crossman continued, “We believe by leveraging our
sourcing capabilities to realize cost savings across all three
components of making a jean, from fabric, trim to labor, will
significantly reduce our input costs while we drive top line sales
by building on the strengths of each company’s distribution.”
Based in Los Angeles, California, and founded by Peter Kim in
2002, Hudson is a leading, global designer and marketer of women’s
and men’s premium branded denim apparel. Kim, who will remain Chief
Executive Officer of Hudson, will become a member of the Joe’s
Jeans Board of Directors. Hudson’s products include a core denim
line as well as non-denim tops and bottoms. As a global fashion
brand, Hudson continuously innovates within its product line,
introducing new styles, washes, cuts, fabrics and colors, all
designed under the premise of one superior fit. Hudson’s products
are available at department stores and selective boutique and
specialty stores around the country, as well as premier retailers
in over 30 countries around the world.
Peter Kim stated, “We are thrilled at the prospect of joining a
highly respected team of people that has created an incredible
business. To be able to collaborate with Joe's Jeans to create one
of the largest premium denim companies in the world is a phenomenal
opportunity for us all. We look forward to benefiting from each
other’s strengths and to entering a new chapter of growth.”
Dan Fireman, Managing Partner of Fireman Capital Partners, which
acquired a controlling stake in Hudson in 2009, said, “We are proud
of our partnership with Hudson and all that we have achieved
together, and are pleased that Hudson has found a perfect home with
Joe’s Jeans to take the company to the next stage in its
development.”
Mr. Crossman concluded, “Hudson Jeans represents a great fit for
our business model. There are many complementary features between
our two organizations that should allow us to realize future
operating benefits and cost savings. At the same time, each brand
has multiple channel expansion opportunities both domestically and
overseas that will drive top-line growth and operating expense
leverage over the long-term.”
Joe’s Jeans expects the transaction will close on or about
August 31, 2013 subject to the contingencies described herein and
subject to the satisfaction of customary closing conditions as set
forth in the definitive stock purchase agreement. The stock
purchase agreement terminates unless the transaction closes by
August 31, 2013 unless extended by the parties. Among other things,
the transaction is contingent on obtaining the receipt of
commitments for and closing under senior secured and junior debt
financing facilities in an amount of not less than $80 million to
provide for acquisition financing and future working capital needs
of Joe’s Jeans. At the closing, Joe’s Jeans estimates that the
outstanding indebtedness will be approximately $85 million
including the convertible notes. In connection with such financing,
intercreditor arrangements, including agreements concerning the
nature of the subordination of the convertible notes, must be
reached among the prospective holders of the convertible notes and
the prospective senior lender. Joe’s Jeans has non-binding funding
term sheets from prospective lenders for the funding, subject to
certain customary closing conditions. Based on discussions with
possible senior lenders, Joe’s Jeans is confident that it will be
able to obtain satisfactory senior financing, but there can be no
assurance that adequate financing will be obtained or that the
terms of the subordination will be agreed upon.
The convertible notes in principal amount of approximately $24.1
million, subject to adjustment for the purchase price, to be issued
to Hudson’s management stockholders will be structurally and
contractually subordinated to Joe’s Jeans’ existing senior debt,
have a term of six years, would accrue cash interest paid quarterly
on the outstanding principal amount at an annual rate of 10% per
annum, and will be convertible by each of the holders beginning two
years after the closing of the acquisition and ending 6 years after
the closing, into shares of our common stock or cash, in certain
circumstances, at Joe’s Jeans’ election. The $10 million, subject
to adjustment for the purchase price, in principal amount of
convertible notes to be issued to Hudson’s institutional investor
stockholder will be structurally and contractually subordinated to
Joe’s Jeans’ existing senior debt, have a term of six years, would
accrue cash interest paid quarterly on the outstanding principal
amount at an annual rate of 6.50% per annum, and will be
convertible by the holder beginning one year after the closing of
the acquisition and ending six years after the closing, into shares
of our common stock or cash, in certain circumstances, at Joe’s
Jeans’ election. The convertible notes would be convertible, in
whole but not in part, at a conversion price of $1.78, subject to
certain adjustments that are typical for convertible notes of this
type, into approximately 19.1 million shares of common stock,
subject to receipt of Joe’s Jeans stockholder approval to increase
the number of authorized shares, if necessary, and to comply with
NASD rules. Joe’s Jeans contemplates seeking shareholder approval
promptly after the closing of the transaction. Prior to receipt of
such stockholder approval, the conversion rights will be limited to
approximately 13.5 million shares. If Joe’s Jeans elects to pay
cash with respect to a conversion of the convertible notes, the
amount of cash to be paid per share shall equal the then
outstanding principal amount of the convertible note divided by the
average of the closing prices for the stock over the 20 trading day
period immediately preceding the notice of conversion. Joe’s Jeans
will have the right to redeem the convertible notes at any time by
paying an amount equal to the principal amount plus interest that
would have accrued through the maturity date and upon such
redemption the holder would retain the conversion right applicable
to the note. Certain insiders of Joe’s Jeans holding approximately
23% of the votes have agreed to vote in favor of authorizing Joe’s
Jeans to issue, at Joe’s Jeans’ election, the maximum amount of
shares of common stock upon conversion of the convertible
notes.
Threadstone Advisors LLC served as financial advisor to Joe’s
Jeans on the transaction and Akin, Gump Strauss Hauer & Feld
LLP served as legal advisor to Joe’s Jeans. Lazard Middle Market
LLC served as financial advisor to Hudson Clothing on the
transaction and McDermott Will & Emery LLP served as legal
advisor to Hudson.
About Joe’s Jeans Inc.
Joe's Jeans Inc. is a casual chic lifestyle brand offering a
unique interpretation on classic, modernized wardrobe staples
encompassing a versatile range of timeless styles from premium
denim and handcrafted collection pieces to contemporary accessories
and footwear.
With over a decade in fashion, Joe's® has remained true to their
DNA throughout their expansion, embracing fashion innovation in the
creation of a full faceted line for Men, Women and Kids. Joe’s® is
available coast to coast in the USA and internationally throughout
Europe, Asia, Canada, Latin America and the Middle East.
Visit: joesjeans.com or facebook.com/joesjeans
About Fireman Capital Partners (FCP)
Fireman Capital Partners invests in consumer-focused companies
through both growth equity and buyout transactions. The private
equity firm focuses on dynamic consumer businesses with revenues
between $20 and $150 million, and who have a unique vision and
strong management. Fireman Capital leverages its capital, extensive
relationships, and deep operating expertise to add substantial
value.
This release contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, as amended. The matters discussed in
this news release involve estimates, projections, goals, forecasts,
assumptions, risks and uncertainties that could cause actual
results or outcomes to differ materially from those expressed in
the forward-looking statements. All statements in this news release
that are not purely historical facts are forward-looking
statements, including statements containing the words “intend,”
“believe,” “estimate,” “project,” “expect” or similar expressions.
Any forward-looking statement inherently involves risks and
uncertainties that could cause actual results to differ materially
from the forward-looking statements. Factors that would cause or
contribute to such differences include, but are not limited to: the
parties’ ability to close the acquisition of Hudson Clothing
Holdings, Inc., or Hudson, including obtaining financing to fully
fund the acquisition and satisfying the conditions in the stock
purchase agreement, including the receipt and terms and conditions
of any required governmental of the proposed acquisition that could
reduce anticipated benefits or cause the parties to abandon the
acquisition, the diversion of management's time and attention from
our ongoing business during this time period, the impact of the
acquisition on our stock price, the anticipated benefits of the
acquisition on our financial results, business performance and
product offerings, our ability to successfully integrate Hudson’s
businesses and realize cost savings and any other synergies, the
risk that the credit ratings of the combined company or its
subsidiaries may be different from what the companies expect,
continued acceptance of our product, product demand, competition,
capital adequacy, general economic conditions and the potential
inability to raise additional capital if required, the risk that
Joe’s Jeans will be unsuccessful in gauging fashion trends and
changing customer preferences; the risk that changes in general
economic conditions, consumer confidence, or consumer spending
patterns will have a negative impact on Joe’s Jeans financial
performance; the highly competitive nature of Joe’s Jeans business
in the United States and internationally and its dependence on
consumer spending patterns, which are influenced by numerous other
factors; Joe’s Jeans ability to respond to the business environment
and fashion trends; continued acceptance of the Joe’s® brand in the
marketplace; and other risks. Joe’s Jeans discusses certain of
these factors more fully in its additional filings with the SEC,
including its last annual report on Form 10-K and quarterly report
on Form 10-Q filed with the SEC, and this release should be read in
conjunction with those reports, together with all of the Joe’s
Jeans other filings, including current reports on Form 8-K, through
the date of this release. Joe’s Jeans urges you to consider all of
these risks, uncertainties and other factors carefully in
evaluating the forward-looking statements contained in this
release.
Any forward-looking statement is based on information current as
of the date of this document and speaks only as of the date on
which such statement is made, and Joe’s Jeans undertakes no
obligation to update these statements to reflect events or
circumstances after the date on which such statement is made.
Readers are cautioned not to place undue reliance on
forward-looking statements.
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