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Private Equity Briefcase

By Kelly Holman, IDD Magazine

August 24, 2009

Advent Keen On Women's Fashion

What is it about trendy juniors' apparel that intrigues private equity firms, or perhaps more specifically (given the latest deal in the retail space) Advent International?

The Boston private equity firm just inked its latest deal in the juniors' segment with its agreement to acquire Charlotte Russe Holding Inc. on Monday for $17.50 a share, or $380 million. It's an offer that marked a 27% premium for the San Diego-based company's Nasdaq-traded shares above their last trading day on Friday.

Shares of Charlotte Russe, a 501-store chain company whose target market is young women in their teens and twenties, have outperformed that of other junior retailers like Bebe Stores Inc., Wet Seal Inc. and Hot Topic Inc.

Charlotte Russe, which posted $823.3 million in sales last year, isn't the only seller of fashionable women's clothing that Advent has noticed. In December 2005, it made a $93 million equity investment in Canadian women's yoga clothing retailer lululemon athletica, a maker of yoga clothing with the "ability to make butts look great" as a recent New York magazine article touted.

The deal proved to be a sweet one for Advent and lululemon, which priced its initial public offering above its target range two years ago at $18 per share. 

Lululemon wasn't the only deal involving a trendy apparel maker that Advent executed in 2005. Before it purchased lululemon, the Beantown firm acquired U.K. women's and men's apparel retailer Fat Face for a reported $165.1 million (£100 million). In April 2007, it sold the company to European private equity house Bridgepoint for $707.9 million (£360 million).

The traditional excuse raised by private equity firms for not investing in retail -- fashion risk -- clearly doesn't apply to Advent. Its current investments in women's fashion include stakes in France's Gérard Darel and Germany's Takko Fashion.

If its experience with lululemon offers any indication, the Boston firm knows a thing or two about the apparel business. That's not a bad thing to understand given that school is about to start. Whether it is teens or college-age women, there's likely to be the usual fall fashion shopping rush.

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Kelly Holman

Kelly Holman is the assistant managing editor at Investment Dealers' Digest, where he writes about private equity and leveraged finance. Prior to joining IDD, he reported on leveraged buyout transactions, private equity fundraising activity, corporate auctions, the middle market and credit markets as a senior writer for The Deal. Before joining The Deal in 2000, Holman was a reporter for PRWeek magazine, where he reported on financial services PR and investor relation activities, as well as international PR developments. He also assisted with Haymarket Media Group's US launch of the public relations trade magazine. Previous to PRWeek, Holman wrote about private equity for Private Equity Week and Buyouts and served as a contributor to IDD in the late 1990's. A Colorado transplant, Holman has called New York home for more than a decade. He received his B.A. in Mass Communications from the University of Colorado at Denver..

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