Fur goods maker Stallion Inc. has galloped off with Gores LLC's majority stake in J. Mendel, wrapping-up a roughly six-month auction process for the nearly 150-year old luxury fashion house.
Financial terms of the transaction weren't disclosed. Gilles Mendel, who took the helm as designer and CEO of J. Mendel in 1981, will retain a significant stake and continue as chief creative officer of the company.
Stallion is a private company based in Long Island City, N.Y.
The change in ownership of J. Mendel, a fifth-generation family luxury brand, announced Tuesday, Sept. 22, comes after luxury handbag retailers Michael Kors Holdings Ltd. (KORS) and Coach Inc. (COH) posted waning earnings in their latest quarterly reports. Both have been listed on The Deal's watch list of top potential activist targets on numerous occasions.
While potential acquirers in the luxury goods market are becoming more disciplined, the interest garnered for J. Mendel is evidence that there's still room for brands that are able to reinvigorate themselves and connect with the consumer, explained Elsa Berry, who as managing director and founder of Vendôme Global Partners LLC, a New York luxury- and beauty-focused investment banking firm, advised J. Mendel on the transaction.
"On one hand, there's too many brands trying to sell, but not as many buyers are buying," Berry said. "There's more demand for the authentic brands [such as J. Mendel] that are long-lasting."
Founded by the Mendel family in 1870 in St. Petersburg as a boutique centered around luxurious furs to serve Russian aristocracy, J. Mendel is one of few luxury labels that remains a family business. The brand relocated to Paris in 1920 and in 1981 established a new home base in New York. The first freestanding J. Mendel boutique in the U.S. was launched in 1995 on New York's Madison Avenue.
The brand expanded beyond fur in the earlier 2000s. Mendel launched a ready-to-wear line in 2002; its first couture bridal collection in 2007; and most recently added a collection of handbags created from fur, luxury leather and alligator. The company also now offers accessories and home furnishings.
J. Mendel boutiques now can be found in New York, London and Seoul, and the brand has a presence throughout 80 high-end retailers worldwide.
"On the basis of enquiries received from outside parties along with the need for new capital to support growth initiatives," a process to consider options for Gores' stake in the red carpet favorite formally got under way in March, J. Mendel chief executive Marc Durie wrote in a Wednesday e-mail.
The company's uniqueness and various avenues for growth drew looks from a diverse pool of potential buyers that included high-net-worth individuals, some private equity firms, strategic players and international players from Europe to Asia and the Middle East, Berry added.
Different parties were interested for different reasons--whether it be J. Mendel's retail and wholesale business in the U.S., global demand for the brand or its expansion into the bridal and accessories categories, she explained.
"How often do you get a 150-year-old company that has this kind of expertise and has the family involved?" Berry said.
While the fashion house did fetch significant interest, Berry said the process was very tactical and well thought out, with the emphasis largely centered around finding a partner with a long-term horizon. Under the wing of Stallion, the luxury goods company is positioned to further develop its different product categories and its retail and wholesale operations and to enlarge its international footprint, she said.
Both Berry and Durie declined to comment on terms of the deal.
For Gores, the exit comes about five years after the Los Angeles private equity firm bought a majority stake in J. Mendel. Terms of the Aug. 30, 2010, transaction weren't disclosed.
A BDA Partners team led by Euan Rellie and Justine Mannering served as financial adviser to Gores and J. Mendel. BDA's Matthew Doull, Anna Sacks and David Kim assisted.
Vendôme Global Partners' Louis Fabregas assisted Berry on the transaction on behalf of J. Mendel.
Howard Feller of MMG Advisors represented Stallion.