Perry Ellis Offers $54 Million to Buy Bugle Boy Assets
The Miami company that licenses the Perry Ellis men’s clothing line has offered $54 million to acquire the wholesale operations of Bugle Boy Industries Inc., according to officials at the troubled Simi Valley sportswear maker, which is in the process of liquidating its assets after filing for Chapter 11 bankruptcy protection last week.
Under terms of the agreement, Perry Ellis International Inc. would acquire the Bugle Boy name, licensing operations and certain inventory and accounts receivable. If approved by Bankruptcy Court, it would mark the latest acquisition by Perry Ellis International, which owns a number of brands, including John Henry, Ping Collection and Munsingwear.
“They have a history of buying underperforming brands and realizing upside in terms of substantial sales growth,” said Harvey Robinson, senior equity analyst for Chapman Co. in Baltimore.
In striking the preliminary deal with Perry Ellis International, Bugle Boy is separating its clothing manufacturing operation from its retail stores, which are being closed, and selling it as a going concern. Privately held Bugle Boy posted $423 million in sales last year, $154 million of which came from its wholesale operations.
Kenneth C. Henry, the chief executive hired to shepherd Bugle Boy through its liquidation, said he has been contacted by a number of companies interested in acquiring the firm’s wholesale trade. He said Perry Ellis International was the first to make a firm offer and agree to acquire the operation substantially intact.
“We’re trying to sell it as a going concern,” Henry said. “That’s where we can get the most value.”
Henry said the deal with Perry Ellis International isn’t final and that anyone with a higher bid could attempt to purchase the assets out of bankruptcy.
Although it appears that the Bugle Boy label will survive, its 213 retail and outlet stores will not. Henry said Bugle Boy has signed an agreement with a consortium of liquidators that will soon begin selling off inventory and closing stores. Henry said Bugle Boy employs about 3,500 nationwide. Most are in the retail operation and will lose their jobs.
In addition to the proposed $54-million agreement with Perry Ellis International, Henry said, the deal with liquidators is expected to net Bugle Boy $38 million to pay off creditors. The company is saddled with an estimated $100 million in debt.
Formerly known as Supreme International Corp., Perry Ellis International changed its name in 1999 after acquiring the Perry Ellis trademarks. The publicly traded company posted $252 million in sales last year and has been consistently profitable.
But analysts say the company has been buffeted by the sour retail climate that has hurt many apparel makers. Its stock has been hammered in recent months, and its quarterly earnings report for the three-month period ended Oct. 31 showed net income plunged to 5 cents a share, from 58 cents in the same quarter of 1999.
The company’s stock dipped 6 cents to close at $7.25 on Nasdaq on Wednesday.
In a published statement, George Feldenkreis, chairman and chief executive of Perry Ellis International, called the pending Bugle Boy acquisition “a tremendous addition to our portfolio of brands.”
Stock analyst David P. Campbell of Merrill Lynch said “third-tier” brands such as Bugle Boy have been losing space on retailers’ shelves to well-known national brands and private-label clothing. Still, he said the acquisition likely would help Perry Ellis International in terms of diversification.
“It’s a good acquisition if they didn’t overpay for it . . . and they can grow the sales,” Campbell said.
