Iconix to Buy OP from Warnaco

NEW YORK – Iconix Brand Group Inc. has again dipped its toes into the waters of the West Coast with its agreement to acquire the Ocean Pacific brand from the Warnaco Group for total consideration of about $54 million.

Iconix, increasingly operating as a brand portfolio manager with labels including Candie’s, Joe Boxer and London Fog, had previously entered into an agreement to purchase Mossimo, the Los Angeles-based designer brand with exclusive U.S. distribution in Target stores.

Under terms of the OP agreement, announced late Tuesday, Warnaco will continue to manufacture and sell women’s and junior swimwear under the OP label, although it will do so as a licensee. Upon consummation of the transaction, expected in November, Warnaco would be paid $10 million in cash and a short-term note payable in full by year’s end. Payment of the note would consist of at least $17 million in cash with Iconix common stock making up the balance. Iconix has the option to extend payment through Jan. 31 of next year, at which time the cash portion of the payment would rise to $30.5 million or more, with the remainder in Iconix common stock.

Warnaco and Iconix made no mention in their joint announcement of whether Richard Baker will continue as CEO of the brand. Baker was out of the country on vacation and phone calls to Warnaco and Iconix weren’t returned.

Ocean Pacific was founded by Jim Jenks in Orange County, Calif., in the early 1970s and emerged as the strongest of the second generation of surfwear brands that followed Hang Ten out of the waters of the Pacific and into the sportswear arena of major department and specialty stores throughout the U.S. Warnaco had a relatively brief stewardship of the brand, which it bought in August 2004 from Doyle & Boissiere Fund I LLC for $40 million in cash and $1 million in assumed debt.

“The action sports lifestyle segment is an area that Iconix has been seeking to penetrate,” said Neil Cole, chairman and chief executive of Iconix. “OP is the original action sports lifestyle brand with tremendous authenticity, high brand awareness and applicability to a broad variety of consumer products, including apparel, accessories and sports equipment like surf, snow and skate boards. OP has a large global footprint with 15 different international licensees, and Iconix believes it can expand OP’s international business further and significantly grow the brand’s penetration in the U.S.”

OP also has about 15 domestic licensees.

In the same statement, Joe Gromek, Warnaco’s president and CEO, said that Warnaco’s managers “continually assess our portfolio of brands and licenses to ensure we focus on our strongest platforms for growth. While we have made significant progress in restructuring the OP business, the sale will allow us to increase our attention on our core brands and on our international opportunities, which are the key drivers of our growth strategy.”

Meanwhile, he added, the firm is “pleased” that its association with brand can continue as a licensee.

Warnaco’s swimwear and sportswear brands include Speedo, Cole of California, Catalina, Chaps, Nautica, Michael Kors and Calvin Klein.