Bankrupt Brooks Brothers Agrees to Sale to Simon Property and Authentic Brands

Brooks Brothers, the venerable retailer that was founded in 1818 and filed for bankruptcy last month, said it would be sold to Simon Property Group, the biggest mall operator in the United States, and Authentic Brands Group, a licensing firm.The $325 million offer for Brooks Brothers, up from a $305 million bid last month from the same suitors, is subject to court approval this week, the companies said in a statement late on Tuesday. The buyers committed to continue operating at least 125 Brooks Brothers retail locations. Before the pandemic, the company operated 424 retail and outlet stores globally, including 236 in the United States, according to court documents.The offer for Brooks Brothers came from an entity known as the SPARC Group, a joint venture between Simon Property and Authentic Brands Group. The mall owner and A.B.G. have teamed up on deals to buy other bankrupt retailers in recent years, including the teen chain Aéropostale and the fast-fashion behemoth Forever 21. SPARC has also bid on Lucky Brand, the denim company that filed for bankruptcy last month. A.B.G. is known for acquiring the intellectual property of brands like Barneys New York and Sports Illustrated, then licensing their names to other companies and earning royalties from related products.The coronavirus outbreak has toppled several storied retail brands, especially those focused on apparel, as many stores were forced to temporarily close and demand for new clothing dropped in a remote, less social environment. Chains including J.C. Penney, J. Crew, Neiman Marcus and the owner of Ann Taylor and Loft have filed for bankruptcy protection since May, struggling with lost sales and heavy debt loads. Most say they plan to re-emerge with fewer stores.Brooks Brothers, based in New York, is the oldest apparel brand in continuous operation in the United States, and has a rare and storied reputation. It has dressed all but four presidents dating to James Madison, has been worn by Clark Gable and Andy Warhol and is the official clothier of the Jazz at Lincoln Center Orchestra. Abraham Lincoln was wearing a Brooks Brothers coat the night he was assassinated.It was revived in the past two decades by the Italian industrialist Claudio Del Vecchio, who bought it in 2001. The retailer started to slip in recent years, battered by the rise of more casual workplace attire and the shift to online retail, prompting a search for new buyers or investors. Brooks Brothers said in court documents that since April 2019, its business had been marketed to more than 90 potential investors around the world. The retailer said that its revenue exceeded $991 million for the fiscal year that ended 2019, with about one-fifth of that coming from its North America e-commerce business.The pandemic dealt a new and unexpected blow to Brooks Brothers, given its pricey, formal merchandise and reliance on physical retail. Not only were its stores temporarily closed, but so were the offices of many of its customers. Proms, weddings, graduations, bar mitzvahs and other special occasions fell off calendars. On Zoom, sweatpants cannot be distinguished from tailored dress pants.The level of distress at Brooks Brothers came into sharper focus this year when the company prepared to close its three U.S. factories, in Massachusetts, New York and North Carolina, forgoing its “Made in America” calling card, and announcing plans to lay off nearly 700 employees. Like many retailers, it furloughed most of its staff — it had roughly 4,000 employees before the pandemic — and cut the salaries of corporate workers. Before filing for bankruptcy, it had already decided to close 51 Brooks Brothers stores in the United States.If it is approved, the acquisition by the SPARC Group will have proceeded remarkably quickly, given that Brooks Brothers filed for bankruptcy protection on July 8.On an earnings call this week, David Simon, the chief executive of Simon Property, outlined several benefits to the acquisitions of bankrupt retailers through SPARC, which he referred to as a 50-50 joint venture with A.B.G. He said that it was acquiring inventory at or below cost, buying any intellectual property at “attractive values,” cutting the overhead costs of purchased companies and able to reject certain leases.He disputed the notion that Simon Property was “buying into these retailers to pay us rent,” saying that the company believed in the brands and thought they could make money. He also noted that the venture was saving jobs at places like Brooks Brothers.“That’s what we should talk about,” he said on the call. “We’re doing our fair share for trying to keep this world as normal as we can.”Elaine Yu contributed reporting.


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