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| Iconix to acquire 51% controlling interest in Ecko Brands | | October 28, 2009 (USA) |  |
 Iconix Brand Group, Inc. announced that it has signed a definitive agreement to acquire a controlling interest in the Ecko portfolio of brands, which represents over $1 billion of annual global retail sales. The Ecko portfolio includes Ecko Unlimited, Marc Ecko, the Rhino logo and Zoo York. Iconix will form a joint venture company with an affiliate of the Sellers to acquire the trademarks. Iconix will have a 51% interest in the joint venture and will control the licensing company and consolidate its results. Marc Ecko will continue in his capacity as the Chief Creative Officer of the company as he has since its inception.
Neil Cole, Chairman and CEO of Iconix Brand Group, Inc. commented, "This purchase is consistent with our strategy to opportunistically acquire leading consumer brands that offer long-term growth potential when integrated into our business model. Marc and Seth have built powerful lifestyle brands and we look forward to working with them to continue to build these businesses on a global basis.
The Ecko portfolio is a collection of powerful lifestyle brands some of which we believe could lend themselves easily to our direct retail model. In addition, Ecko already has strong licensing partners and a robust European platform, from which we could leverage the rest of our portfolio. Iconix and our shareholders will benefit from this accretive transaction as we are acquiring a strong portfolio of consumer brands at an attractive multiple."
Seth Gerszberg, commented, "I have always admired Iconix's brand stewardship and dynamic development of licensing opportunities. As we enter our next stage of growth and development, Marc and I are excited to benefit from Neil's market intuition and experience."
Marc Ecko, commented, "I am excited for the opportunity to partner with Iconix and have them join Seth and me on continuing this amazing journey. Ever since I have started, people have tried to marginalize streetwear as a niche business. After 15 years of consistent global retail growth and product expansion, I am excited at taking this next step. This partnership is a great fit for us. Iconix gets our passion for our brand and will support us to realize our vision for the future. This new venture provides me the bandwidth for my brand and allows me the resources and freedom to extend my professional and creative ambitions beyond my current platform of fashion, video gaming and publishing. "
For this acquisition, Iconix will pay $63.5 million of its cash, and the joint venture, of which Iconix will own 51%, will obtain $90 million of financing at an annual interest rate of approximately 7.5%, which is non-recourse to Iconix. Therefore, Iconix's effective purchase price for this acquisition will be $109 million. On a pro-forma basis for 2010, the Company expects the joint venture to generate approximately $42 - $44 million in annual net royalty revenue.
Based on a pre-defined revenue andprofit sharing calculation in the agreement the Iconix share of the gross royalties from the joint venture will be approximately $26 million. Iconix will control the licensing business and will therefore consolidate 100% of the results of this joint venture with minority interest being deducted below the operating income line, and only the earnings attributable to Iconix will be included in EBITDA. | | | | Iconix Brand Group, Inc | |
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