Lee is the latest brand to join the Authentic Brands Group portfolio.
On Thursday, the global brand and entertainment platform said it has signed a definitive agreement with Kontoor Brands Inc., to acquire Lee in a deal valued at up to $1 billion — an initial transaction value of $750 million and a $250 million earnout opportunity in future years based on the performance of the brand under Authentic’s ownership.
Lee currently generates about $1.5 billion in annual sales across 73 countries, with nearly 40 percent coming from outside the U.S. and Canada.
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Once the deal is completed, which is expected some time in the second half of this year, Authentic will convert the Lee business into a licensing model. The company is currently “in discussion with leading brand operators to support Lee’s existing business and expand it across content, experiences and heritage-driven lifestyle categories,” Authentic said in a statement about the deal.
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“What makes Lee so compelling is its legacy,” said Jamie Salter, founder and executive chairman of Authentic. “It’s one of the most important names in denim, with more than a century of heritage, consumer awareness and cultural relevance already built in. At Authentic, we focus on preserving what consumers love about their favorite brands while putting the right partners, distribution and marketing strategies behind them to drive long-term growth. Lee is exactly the kind of brand we are built for.”
Kontoor announced its intention to divest the Lee brand earlier this month to focus its efforts on its Wrangler and Helly Hansen subsidiaries. The sale allows Kontoor to reposition its portfolio to concentrate on the “structurally higher-growth segments anchored in denim, outdoor and workwear,” the Greensboro, N.C.-based company said Thursday.
“The Lee transaction is a deliberate step to sharpen our brand portfolio and unlock investment capacity to fuel accelerated growth for the future of Kontoor,” said Scott Baxter, president, chief executive officer and chairman of Kontoor Brands. “By increasing our focus on Wrangler and Helly Hansen, two iconic brands with significant white space opportunities, we are better positioned to fuel a higher-growth profile and create even greater value for our shareholders.
“I want to reinforce our commitment to support Lee through the sale process and to personally thank the Lee team for getting us to where we are today. We believe this is a great outcome for Kontoor, the Lee business and Authentic,” Baxter added.
Kontoor said it will use the proceeds to repurchase shares and pay down loans. This is the second big piece of news to come out of Authentic this week. On Wednesday, the company said that Salter would transition to executive chairman and president Matt Maddox would take over the CEO role. That move is part of the company’s most recent quest to go public, a process it expects will happen within the next year. Authentic currently has more than $36 billion in annual retail sales.