At the height of the private equity party in 2006 Apollo Management paid $1.3 billion for Linens N Things. Now, as the bankrupt chain throws in the towel, a newcomer has caught the brand name for a mere $1 million, apparently hoping to one day cash in on it along with other brands.
Liquidators Hilco Consumer Capital LLC and Gordon Brothers Brands LLC completed the acquisition via a joint venture called LNT Acquisition LLC. The deal gives the firms, who were involved with liquidating the company, the rights to the Linens N' Things Web domain, e-mail lists and proprietary brands including Luxe Versailles, Attitude, Super Set, Cook at Home and Hotel Living.
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Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware in Wilmington had approved the sale of Linens intellectual property to LNT Acquisition during liquidation hearings January 16 (See story in The Deal Pipeline). The Hilco-Gordon Brothers venture was named the winning bidder of the intellectual property after there were no competing bidders at the Jan. 15 auction, according to Scott L. Hazan, counsel to the official committee of unsecured creditors, at Otterbourg, Steindler, Houston & Rosen PC.
For the venture there isn't a lot of risk because it reportedly isn't paying $1 million upfront. According to trade publisher Home Textile Today, the venture will receive a $300,000 transaction fee for buying the LNT brand, and is due a $350,000 annual management fee. In other words, the joint venture should break even at the end of year two, less expenses of trying to revitalize the name either as an online brand or via a store-within-a-store model.
LNT is just the latest name that the pair has acquired through the years. Other defunct retail names include furniture chain Bombay Co., and electronics retailer Sharper Image. The Gordon-Hilco joint venture already is trying to revive these brands, and reportedly hopes to generate $200 million in annual revenue from licensing fees, which typically range from 1.5% to 20% of product sales, according to the Globe & Mail. In order for the firms to meet their target, they'd have to sell about $2 billion assuming the average licensing fee was 10%.
Who might help them reach their goal? Hilco has already found two, Macy's and Bed Bath & Beyond, for The Sharper Image brand, which it acquired at a bankruptcy auction in May. The two chains sell speakers, MP3 players and other gadgets emblazoned with The Sharper Image logo.
But what of the Linens brand? Who might have an interest? In order to reach their sales targets, they'll need more high-volume retailers with a lot of floor space to dedicate to the brand. The first name to come to mind is Sears Holdings, which already manages store-within-store brands like Lands End. Other likely takers who might afford floor space include Target, Wal-Mart, Kohls, and JC Penney. Some of these partners may also have interest in the Bombay brand too.
At $2 billion, that's a lot of cheap electronics and towels. Hopefully, they'll find a partner for the Bombay name, because even at the low end of the licensing fees, big ticket items like sofas and loveseats will get them a lot closer to their target. - Matthew Wurtzel
