Overview
This past July, I wrote a rather bearish piece on Fifth & Pacific (FNP), the parent company of Kate Spade. In it, I posited that the sum of the parts was much less than the entire company was being valued at. At the time, there were several huge news events surrounding FNP and since I wrote that article, many of them have materialized as fact from rumors. However, FNP shares have risen even further from when I called it too expensive and at this point, we've got some more color on what FNP looks like now and going forward. In this article, we'll take a look at what FNP has done since my original article and what it means in the context of the market value of the company going forward.
Business Review
When I first visited FNP, it was a holding company that had four brands: Juicy Couture, Lucky Brand, Kate Spade and Adelington Design Group. At the time, rumors were swirling that Juicy and Lucky were possibly on the chopping block as FNP was looking to unload them to willing buyers. For some context on why these two were being shopped, see my previous article. At any rate, the rumored price tags, respectively, for Juicy and Lucky were in the $300 million and $400 million ranges. At those prices the brands were being valued at 8 to 10 times EBITDA and roughly 0.8 times sales.
Since that time, Lucky and Juicy have both been sold and the terms were somewhat less enticing than management may have hoped. Lucky was sold for $225 million and Juicy Couture was sold for an aggregate consideration of about $180 million after a lucrative lease termination payment on its flagship store in New York. The combined consideration for these brands of roughly $400 million
