_{DEAL OF THE MONTH}

Authentic Does a Good Deal, I Guess?

Guess what? It’s time for the Authentic Buysiders experience again as we dive into the top deals of the month.

Kicking us off: Guess is going private at a $1.4 billion valuation. Authentic Brands Group (ABG) will take 51%, while the Marciano family (Maurice, Paul, and Nicolai) plus CEO Carlos Alberini roll their equity for the remaining 49%.

For those of you who don’t know what Authentic Brands is, they own Brooks Brothers (among other brands). Where every single one of you got your first blue blazer and khakis.

Now it’s time to roll-up your jeans because the transaction isn’t actually as simple as it sounds on paper. Authentic is acquiring 51% of an entity that will own and license all of Guess’s IP and product licensing agreements but the actual operating business and its subsidiaries will 100% be owned by the Marciano family and Alberini.

As we mentioned, Guess is going private, which means we can take a look at the share price to see how investors reacted. Unsurprisingly, Guess shareholders responded overwhelmingly positively with Guess has trading up ~27% since announcement, though it is still down ~10% on the year.

What is surprising is that Guess has traded up above the proposed acquisition price, which may indicate that a re-trade on pricing is possible. The proposed per share price was $16.75 per Guess’s 8-K, but shares have traded up to almost $17 per share. It is rare to see target companies trade above the offered price for obvious reasons.

Guess currently generates ~$6 billion per year in global retail-equivalent sales and will become the second largest brand in the Authentic Brand Group, making this a transformational deal for Authentic as well. Authentic’s portfolio wide retail sales will grow to ~$38 billion, a ~19% increase.

I guess you could say that this deal is jean-ius for Authentic, who does not want to be in the brick-and-mortar business but wants to focus on branding.

_{NEWS ROUNDUP}

Top Reads

• Altassian to acquire The Browser Company for $610 million

• Carlyle’s Alpinvest raises $20 billion for secondaries

• Coke explores $5+ billion sale of Costa Coffee

• AngloAmerican and Teck set to merge in second largest mining deal ever

• Thoma Bravo to acquire Verint for $2 billion

• Warburg Pincus nears a record $10 billion of exits in 2025

• Eldrige raises $1 billion GP-Solutions fund to back continuation vehicles

• AIP acquires International Paper’s cellulose fibers unit for $1.5 billion

• Nexstar to acquire Tegna for $6.2 billion in cash

• Centerbridge to acquire MeridianLink for $2 billion

_{PRESENTED BY PACASO}

Former Zillow Exec Opens Door to $1.3T Market

The top companies target the biggest markets. That’s why the early investors behind Uber and eBay also backed Pacaso. Founded by a former Zillow exec, Pacaso’s tech reshapes a $1.3T market. No wonder they’ve earned $110M+ in gross profits to date. They even reserved the Nasdaq ticker PCSO. Invest before the opportunity ends on 9/18.

_{STRATEGIC DEAL OF THE MONTH}

Gildan Acquires Hanes

It appears clothing deals are in fashion this month because our second deal of the month is Gildan acquiring Hanes for $4.4 billion. You probably know these brands as the least comfortable undershirts you’ve ever worn.

The deal is a combination of cash and stock, with Hanes shareholders receiving 0.102 Gildan shares per Hanes share and $0.80 per share in cash. This implies a value of $6/share, which is a 24% premium to the unaffected price.

Hanes shareholders will own ~20% of Gildan on a non-diluted basis.

The deal is being struck at 8.9x LTM EBITDA or 6.7x full synergized EBITDA, which is certainly a full valuation.

Gildan is estimating $200 million of cost synergies, including SG&A optimization…which we all know means some people will be updating their LinkedIns.

Gildan is funding the cash portion of the purchase price with ~$2.3 billion of debt, which it will use to refinance the existing Hanes debt as well.

Gildan shareholders clearly think this will be a transformational deal as its share price has risen 8% since the announcement of the deal, something that rarely happens to the acquiring company.

On the Hanes side, shareholders are even more optimistic, with the share price running up above the initial $6/share target, a meteoric 32% increase on the month.

Looking at these two share price graphs, that’s exactly what the Corp Dev guy at each company is hoping for as bonus season comes around the corner.

Two fashion deals in one month still isn’t enough to get me to consider upgrading my wardrobe, but hey if the next brand that does a takeover wants to sponsor an article, I may be convinced to do a little shopping.

_{INT’L DEAL OF THE MONTH}

In the Break-Up Era

What, did you think I’d lost my edge in the food space? Did you think that my crippling caffeine addiction would allow me to miss this deal? Please, grab your PSLs and strap in because we have, of course, another Keurig Dr. Pepper deal.

If KDP sounds familiar, you either have bad taste in coffee (and soda) or you remember our coverage of their Ghost deal almost exactly a year ago (Corp Dev guy hitting his quota?).

Listen, I know break-ups are hard for people, but these days Wall Street is loving them. KDP is using the $23 billion acquisition of JDE Peet’s as a catalyst to separate its coffee and beverage businesses.

Another food conglomerate, Kraft Heinz, announced a break-up recently. Finally disbanding a merger the Street has questioned since it was announced.

KDP is valuing Peet’s at 12.9x EBITDA, but bringing a large, pure-play coffee brand in house allows for KDP to complete its tax-free split up. That is something that KDP likely thought was worth paying up for to ensure it won the auction.

Both businesses the CoffeeCo and BeverageCo are EBITDA positive, and despite being a smaller revenue portion of the business, the BeverageCo has stronger margins (no thanks to Ghost).

Unlike the other deals we saw this month, KDP’s shareholders were less than thrilled with this announcement, causing the share price to plummet over 20%.

It is unclear if shareholders are against the deal or the split up, or both, but what is clear is that they are generally displeased with this use of capital. Could this be a buying opportunity? I’ll leave that to you to decide.

JDE Peet’s on the other hand looks like its share price graph took a big sip of coffee after the deal was announced, trading up ~19% to just below the acquisition price of €31.85 per share, which is expected as investors typically price in some risk that the transaction does not close.

Whether you buy into KDP’s break up story or not, you cannot fault them for going on the offensive as they look to continue to expand their product offerings. If KDP can make good on the break-up and deliver shareholder value, then whoever buys in now will look like a genius. If they can’t deliver, you may have to invest in a company with stronger beverages.