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October 8, 2021 – Further the Court's September 24th bidding procedures order [Docket No. 138], the Debtors have now designated With You, Inc. (“With You”) as the stalking horse bidder in respect of a proposed sale of the Debtors' 62.5% of the membership interests of With You LLC ("WYLLC;" Sequential Brands Group, Inc. is the Debtor holding the interest).
With You, owned by Jessica Simpson (who is set to sign the attached APA as CEO), already owns 37.5% of the membership interests of WYLLC. The Debtors' purchased their majority interest from the Camuto Group in 2015 for $119.3mn+ (see page F-21 of 2015 10-K for further on the then purchase price).
The With You APA is filed as Exhibit 1 to the proposed order approving the designation (itself attached as Exhibit A to the motion) and comes with a $1.95mn break-up fee.
This is the third asset grouping in respect of which the Debtors have now named a stalking horse. At filing on August 31st, the Debtors announced that they had entered into stalking horse asset purchase agreements with each of Gainline Galaxy Holdings LLC (“Galaxy”) and Centric Brands LLC (“Centric Brands”) with (i) Galaxy to purchase the Debtors’ "Active Division Assets" for total consideration of $333.0mn and (ii) Centric Brands to purchase the Debtors' Joe’s Jeans brand for total consideration of at least $42.0mn (comprised of (x) $38.25mn payable upon closing of the transaction and (y) for each of the five consecutive years following the closing of the transaction, an annual cash payment equal to 1.0% of Net Wholesale Sales for the applicable year, subject to a minimum payment of $750,000 per year, the “Earnout Payments”). On September 29th, the Debtors filed an 8-K in respect of revised sales terms for their Joe's Jeans assets, including an increase in the cash element of the purchase price to $45.0mn and the elimination of earlier agreed earn-out payments. The revised Centric Brands APA is attached to the filing. In 2019, Centric Brands entered into a multi-year licensing deal with WYLLC (ie Ms Simpson and the Debtors). Of course that was before Centric Brands filed its own Chapter 11 from which it emerged in October 2020.
Key Terms of the With You APA:
- Seller: Sequential Brands Group, Inc. a Delaware corporation
- Purchaser: With You, Inc., a California corporation
- Purchased Assets: (i) the Seller Interests; (ii) the Assumed Contracts; (iii) any domain names, websites, or social media handles owned by Seller that
are exclusively used or necessary for the Business, as set forth in Schedule 2.01(c), including related passwords (collectively, the “Domain Names”);
(iv) any other Intellectual Property owned or licensed by Seller and exclusively used or necessary for the Business that is not otherwise owned or exclusively licensed by the Company; and (v) The With You Avoidance Actions. NB: the "Business" encompasses global rights, property and operations related to Jessica Simpson's fashion collections.
- Purchase Price: On the terms and subject to the conditions contained herein, the purchase price for the Purchased Assets shall be equal to $65,000,000 (the “Base Purchase Price”) plus (b) the amount by which the Estimated Closing Working Capital Amount is greater than zero (0), if any, minus (c) the amount by which the Estimated Closing Working Capital Amount is less than zero (0), if any (the Base Purchase Price, as adjusted pursuant to subsections (b) and (c), if any, the “Estimated Purchase Price”).
- Break-Up Fee: Break-up fee is $1,950,000.00 (the “Break-Up Fee”) and the proposed expense reimbursement is the lesser of (a) $400,000 and (b) all reasonable and documented out-of-pocket third-party expenses actually incurred by With You in connection with the negotiation of the With You APA and the transactions contemplated hereby (the “Expense Reimbursement”). There is also an initial bid increment of $500k.
- Additional Stalking Horse Hearing: October 14, 2021
- Sale Objection Deadline: October 21, 2021
- Bid Deadline: October 25, 2021
- Auction: October 28, 2021
- Sale Hearing: November 4, 2021
About the Debtors
According to the Debtors: “Sequential Brands Group, Inc. (Nasdaq: SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands in the active and lifestyle categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and around the world."
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