Ocean Pacific Buyout Part of Its Next Wave
Ocean Pacific Apparel Corp., one of the oldest names in Southern California’s surf wear industry, is about to get a new owner.
Richard Baker, chief executive of Irvine-based Op, and Montreux Equity, a San Francisco venture capital firm, are in the final stages of a deal to buy Op from Berkeley International Capital Corp.
Baker wouldn’t disclose terms of the deal, but said in an interview that it will be completed by month’s end. The buyout is the latest move in Baker’s strategy to reinvent the casual apparel company--once the biggest name in the surf niche--into a holding company that will buy and manage other apparel brands.
“As soon as the Op sale is completed, we’re looking at other brands,” Baker said. “The whole concept is to place these brands in noncompeting tiers of distribution.”
Among the labels Baker would like to get his hands on is Billabong USA, which is up for grabs after its president, Bob Hurley, announced earlier this month that he would not renew his license with the Australian-based company when it expires next year. Hurley is launching his own surf wear label, called Hurley.
Baker said he also is talking with other well-known surf labels, but declined to name them. His confirmation of the pending acquisition of Op puts to rest industrywide speculation that Irvine-based Gotcha International was on the verge of buying Op. In an interview last week, Gotcha Chief Executive Marvin Winkler declined to comment.
The 51-year-old Baker is not the first to promise to revive the flailing Op name, but his experience indicates he may have the best chance.
He is a former president of Tommy Hilfiger’s women’s division, of Bernard Chaus Inc. and Esprit Womenswear. Baker joined Op in February 1997, replacing acting CEO Jim Skelton, a senior vice president of Berkeley International.
At Hilfiger, Baker was responsible for the development and management of the women’s product licenses. Upon arriving at Op last year, his immediate priority was to upgrade and reconfigure the company’s licensing operations.
Op hires outside manufacturers to make its apparel, footwear and accessories, but oversees the design and marketing of the products. Op gets a percentage of the sales made by its licensees.
Among Baker’s most significant changes was consolidating the five licensees handling the young men’s and boy’s apparel divisions--a nightmare for retailers buying these key categories--into a master licensee, Rays Group in Irvine.
Baker also recently launched a new division called Op Sport, which will feature a line of men’s and unisex active apparel produced and distributed by Virginia-based Tultex. Tultex produces athletic wear under Logo 7, Track Gear, NFL and NBA and holds the licenses for Nike, Levi Strauss and Reebok.
The new division signals the future of the Op brand, which Baker hopes will become more relevant to modern lifestyles by devoting most of the line to diversified outdoor sports.
Op Sport will be backed by a $4-million advertising campaign that includes a colorful fold-out insert in this month’s Rolling Stone magazine.
Baker also has brought the Op Pro, an annual international surfing contest, back to Huntington Beach after a several-year stint in Hawaii. This year’s event, July 17 to Aug. 2, is billed as a beach festival that includes music, reflecting the new, broader marketing strategy.
Licensing has been an integral part of Op’s growth almost since the beginning. The company was founded in 1972 by surfboard maker Jim Jenks who, along with San Diego-based Hang Ten, was among the first to take Southern California’s surf look nationwide.
Op became a widely emulated leader in the industry and at its peak, sales from its worldwide licensing operations topped $400 million.
But the company fell on hard times in the early 1990s under the pressure of rising debts, competition from street-oriented fashions and an attempt to shed its manufacturing operations to focus solely on licensing. Op filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code in May 1992.
Berkeley acquired Op’s assets a year later. Berkeley officials couldn’t be reached for comment Tuesday.
Last year, Op’s 17 licensees generated sales of about $110 million. The company’s apparel, first sold in surf shops years ago, now is sold at such places as JC Penney, Federated and Mercantile stores.
Montreux is a venture capital partnership that was formed in 1993. It helps finance the operations of small and growing companies in exchange for an ownership stake, and makes money by cashing in its stock when those companies go public.
One of its triumphs is Peapod Inc., a money-losing grocery-shopping online and delivery service that raised $64 million in an initial public offering last year. In 1996, Montreux teamed up with North Carolina banking giant Wachovia Corp., which will invest in fledgling companies that Montreux has found.
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Ocean Pacific Apparel at a Glance
Chairman/CEO: Richard Baker
Business: Swimwear, sportswear
Parent company: Berkeley International Capital
Source: Times reports