https://www.bloomberg.com/news/features/2024-07-18/zombie-mall-king-jamie-salter-bets-big-on-sports-entertainment-in-ipo-plan

The Zombie Mall King Doesn’t Want to Be a Bottom-Feeder Forever

Jamie Salter has bought and revived dozens of bankrupt retailers from Barneys to Brooks Brothers. Now he’s going after bigger game.


19 July 2024 at 09:00 GMT+12
Almost every US president has been inaugurated in a Brooks Brothers suit. Civil War soldiers were outfitted in the brand. Hollywood costume designers consistently turned to Brooks Brothers’ archives, whether for The Great Gatsby’s double-breasted waistcoats, the slim 1960s tailoring in Mad Men or the wide lapels of ’80s power suits in Wall Street. But as casual Fridays—and then casual every days—chipped away at suit supremacy, comfort replaced custom tailoring. After a couple of failed ownership changes, the 202-year-old company finally sought Chapter 11 bankruptcy protection soon after the pandemic shut down offices, obviating the need for pants, let alone sport coats. The only one celebrating? Jamie Salter, ready to pounce on the iconic retailer for a fire-sale price, adding it to his portfolio of famous dead brands.

Since its start in 2010, Salter’s Authentic Brands Group LLC had been stalking troubled retailers and picking through their corporate carcasses for one valuable thing: their name. By the time Salter subsumed Brooks Brothers, he’d already bought Aeropostale, Barneys New York, Forever 21, Frye, Jones New York, Nine West and Volcom, disassembling and resurrecting them into hundreds of products. It was a business model with little overhead: Authentic purchases a store chain’s intellectual property, usually for somewhere in the low-mid nine figures, and finds contractors to do the design, manufacturing and pretty much everything else but marketing. That way it gets brands that every shopper knows without taking on all the debt, rent and headcount that sank said brands. By the end of the pandemic, Authentic had devoured a mall’s worth of zombie brands, including Eddie Bauer, Izod, Lucky Brand, Van Heusen and part of JCPenney.

The feast was years in the making. Well before Covid-19 decimated foot traffic and Amazon.com seduced shoppers, the private equity industry had ravaged retail through leveraged buyouts that left many too heavily indebted and eventually needing to file for bankruptcy. "People thought the value of a bankrupt brand was zero," Salter says. "But why would it be zero? So I came up with a strategy to put a value on it."

Salter in Southampton this summer.Photographer: Jonah Rosenberg for Bloomberg Businessweek

Authentic, which Salter says was valued at about $17 billion this year, now owns more than 50 brands and is the third-largest licensor of IP after Walt Disney Co. and media conglomerate Meredith Corp. Its portfolio generates more than $29 billion in annual retail sales, according to the company, which collects a guaranteed minimum royalty of about 5% of each licensee’s annual estimated sales, even if they don’t hit those numbers. But even with those kinds of numbers, Salter, a feisty extrovert with a habit of making midnight brainstorming calls to his business partners, doesn’t want to be a bottom-feeder forever.

During the past four years, Authentic has pushed beyond bankrupt brands into bigger deals, more countries, healthier targets and entirely new industries. The shift began in 2019 with its purchase of Sports Illustrated. Two years later, Salter made his biggest acquisition yet, buying Reebok International Ltd.—fading, though hardly on its deathbed—for $2.5 billion from Adidas AG. Soon after, he bought a majority stake in David Beckham’s lifestyle brand for about $269 million in a deal that made the soccer star a top Authentic shareholder, alongside fellow celebrity-entrepreneur Shaquille O’Neal. Last month, Authentic announced it would continue chasing massive sports-related deals, buying Champion from Hanesbrands Inc. for $1.2 billion. "This was his vision," Beckham says of Salter’s desire to be a sports and entertainment mogul. "And if me and Shaq have played a little bit of a part in that, well, then that was always the plan on Jamie’s side."

The other part of the plan is to take Authentic public in 2026, Salter tells Bloomberg Businessweek. With comparatively low debt, the company looks so far to be avoiding the leverage trap that’s doomed others who’ve attempted brand-licensing empire-building. Still, as Salter’s moves become more brazen, the risks for the company only grow. Some of his sports and entertainment deals have either stalled out or found themselves at the whims of rebellious partners. Juicing a brand bought at a fire-sale price is one thing, but paying billions of dollars for semihealthy names is a much dicier gamble.

Salter started his career selling windsurfing equipment. He’d left his parents’ Toronto home when he was 17—he says it was a standoff over household chores—and after giving higher education a try, he dropped out to become a salesman. He soon started a snowboard equipment company, which he eventually sold, then took his next business, Ride Snowboards, public. After stepping down as chief executive officer, he went to work for another up-and-coming entrepreneur, Michael Rubin, founder of GSI Commerce, which ran online operations for brick-and-mortar brands such as Toys ‘R’ Us that licensed out their names. (A division of GSI eventually became sports merchandising behemoth Fanatics Inc., now valued at around $31 billion.) It was there that Salter saw just how much a license could fuel a business. There was a specific breed of brand that you could buy dirt cheap, license out and resurrect at minimal cost: the bankrupt ones.

So Salter approached Jeff Hecktman, whose firm ran one of the biggest liquidation businesses in the world, about starting a new type of outfit that would buy unwanted IP and revive the bankrupt brands through licensing deals. In a typical scenario, Chapter 11 protection shields a company from the demands of unpaid creditors such as banks, vendors and landlords long enough for it to restructure and emerge with a sustainable balance sheet. When there’s no such hope for survival, the company dissolves, and professional liquidators such as those at Hecktman’s Hilco Global buy the leftover assets—inventory, leases, invoices, equipment, machinery, even office furniture—all to be flipped for cash. At the time Salter contacted Hecktman, there was little market for the trademarks and brand names these companies owned, so the IP would just disappear into the grave.

In 2006, Salter and Hecktman formed Hilco Consumer Capital to buy up that IP before its value disappeared. Typically, if Hilco’s liquidation arm thought inventory and other physical assets of a brand could fetch, say, $100 million in a liquidation sale, Salter could recommend bidding even higher, with a guaranteed return, if Hilco also licensed the name. Then, Salter spotted another untapped IP category with similar dynamics: dead celebrities. Around 2008, Hilco began managing Bob Marley’s estate with the singer’s family, which had long struggled to control an endless proliferation of unlicensed T-shirts, rolling papers and bongs after his death in 1981. Salter cracked down on counterfeits and cut scores of licensing deals for product lines ranging from salad dressing to snowboards. "They don’t fly private, they don’t talk back, they show up to every meeting on time," quips Salter of his lucrative partnerships with dead people.

In a few short years, they spent hundreds of millions of dollars on brands bound for the junkyard including Sharper Image, Linens ‘n Things and Polaroid. But tensions began to brew, Salter says, when he wanted to buy the business from Hilco Consumer Capital and run it himself, his way—namely, with more Wall Street capital and fewer board meetings. In late 2009, he says, he pitched Hecktman on letting him pay $450 million for the whole portfolio; a week later, Hecktman fired him, ostensibly over a confrontation Salter had with Hollywood power player Ari Emanuel during deal negotiations between Polaroid and Emanuel’s client Lady Gaga. "Jamie was incredibly aggressive" at that point in his career, says Rubin, himself known for being a cocksure dealmaker. "Overly aggressive." (A spokesperson for Hilco says Salter never made a buyout offer and the firm parted ways with him over differences in management styles.)

Says Salter: "If Jamie Salter wants to buy something, Jamie Salter gets what he wants"
Incensed, Salter formed a competitor. The business would be different from other players in the sector whose models were debt-reliant, invested little in their ailing labels and let their operating partners worry about costs and margins. Rather than reinvesting in a brand, existing firms often let it run like an old car with no maintenance until the wheels fell off, whatever revenue it eked out in the meantime going toward the next flashy purchase. "You have to keep buying new brands to replace the income stream," says Robert D’Loren, an executive who helped pioneer brand licensing at one of Authentic’s early competitors, Iconix Brand Group, long before it went bankrupt in 2020, and now runs Xcel Brands Inc. "It’s tough to sustain that." Instead, Salter planned to invest in the brands he bought, sometimes by paring down their existing products and licenses, then building back a stable with more discerning licensing partners. In early 2010 he raised $250 million from Leonard Green & Partners to start Authentic Brands Group.

The assets Salter buys are ephemeral—trademarks, publicity rights, images, names and likenesses. A brand is, after all, merely an idea governed by IP laws. But when choosing targets, Authentic does its best to boil down the ephemera to a dollar value. Before Salter bids on a brand, he extensively tests the market appetite, tapping into decades-long relationships with retailers and other merchants that began during his years as a wholesaler, and starts lining up licensing partners. The prep work yields projections of each brand’s earning power that help Authentic bid confidently—and highly. More than once, Salter has blown past competitors with last-minute boosts to his bids, which may reflect his stubborn and competitive streaks as much as anything. Says Salter: "If Jamie Salter wants to buy something, Jamie Salter gets what he wants."

Once it acquires a brand, Authentic sometimes advises licensees on how to boost profits—ranging from layoffs and store closures to nixing inefficient operations. Then, to make new branded products, it licenses the name to an array of specialists all along the supply chain: design, manufacturing, wholesale distribution, retail, e-commerce and more. Early Authentic predecessors would often cut broader, multicategory licenses, sometimes directly with low-cost retailers such as Walmart Inc.—which would expect a bargain but then ignore categories that were part of the bundle. Instead, Authentic will parse out narrower deals, assigning separate licenses for apparel, shoes and accessories—even swim and active wear. Licensing piecemeal also makes the company less dependent on each licensee, enabling it to terminate or reassign licenses without major business disruptions and thus set and enforce terms around how the brand is presented. A single Authentic brand can generate anywhere from 25 to 100-plus licenses, with the company collecting royalties on each. Unlike its predecessors, Authentic has also prioritized taking its brands international, resulting in more than 1,600 licensees globally.

Nine West, one of Authentic’s properties, works closely with the designer and distributor Marc Fisher Footwear, a business that holds the shoe brand’s US and Canada licenses. (Other licensees manage Nine West’s luggage, eye care and even makeup.) These licensing partners each typically have their own contracts with third parties to handle manufacturing, which Authentic consults on and oversees but doesn’t directly manage. "Jamie can take a brand and, overnight—literally in a year—distribute it everywhere: Asia, South America, Europe," says Marc Fisher, the company’s founder, whose father co-founded the original Nine West. "No one thought about doing what Jamie does, at the scale he does." Fisher says a few years ago he tried to buy the shoe brand Rockport, but the owners didn’t bite—then Authentic scooped it up in 2023. "What Jamie can do getting Rockport sold in every corner of the world, I could never have done myself," Fisher says. Now his company is producing Rockport products for Authentic, along with other brands in Salter’s portfolio, including Hunter Boots and Bandolino.

In Authentic’s early days, Salter looked for the most promising brands he could buy on a budget and found them in the remains of crumbling mall atria: Juicy Couture, Nautica, Nine West and Vince Camuto. Meanwhile he built up his dead-celebrity roster with icons including Elvis Presley, Muhammad Ali and Marilyn Monroe, locking in profitable licensing agreements with everyone from Chanel and Dior (Marilyn) to Universal Music Group and Las Vegas chapels (Elvis) to trunks for Everlast (Ali).

By August 2019, as Salter’s name popped up in virtually every conversation about a distressed retailer, he’d sold around 30% of Authentic to BlackRock Inc. for $875 million. It was a move more typical of an aspiring tech unicorn than a fusty retail magnate, but Salter wanted to pay out some earlier investors and get new backing for bigger bets. More deals, though, would also mean more problems.

Illustration: Qianhui Yu for Bloomberg Businessweek

One month after the BlackRock financing, Forever 21 Inc., a fast-fashion chain that was one of the largest privately owned retailers in the US and had almost $3 billion in annual sales, filed for bankruptcy. Two years earlier, Salter had taken notice as the giant chain approached a cash crisis. He stood back and watched as the owners—an increasingly dysfunctional Korean-American billionaire couple who were hemorrhaging money on a doomed international expansion—liquidated stores, laid off employees and terminated vendor relationships. All these steps crushed the brand’s value, and by the time Authentic and partners came forward with an offer, the owners were ready to accept about $80 million for the whole company. This time, Salter would make the rare move of investing in the brand’s stores.

Historically he’d kept his distance from real estate, buying only intangibles, then leaving the pain and risk of managing leases to someone else. For Forever 21 he brokered a novel arrangement: an entity called Sparc Group—as in Simon Property Authentic Retail Concepts—which Authentic co-owned alongside the largest US mall owner, Simon Property Group. Sparc would run the company and its fleet of 500 stores, while Authentic would ultimately be the sole owner of the brand. Simon needed to keep Forever 21 alive because it was a massive anchor tenant in malls, so supporting the retailer after bankruptcy would avoid a slew of vacant storefronts and keep shoppers coming in. The deal was a coup for Authentic, which would license the Forever 21 name to Sparc, then use the stores to carry its other brands, such as Barneys, Juicy Couture and Hervé Leger. In other words, Authentic was essentially licensing to itself, several times over. (A spokesperson for Simon disputes its motivation in Sparc was to retain tenants.)

Three weeks after the Sparc deal closed, the world and its malls went into lockdown—and Authentic got in position to go on an epic shopping spree. Salter began with Brooks Brothers, buying it in 2020 for $325 million. He jumped on one commercial cadaver after the next: Lucky Brand in August 2020; JCPenney the same year (in concert with Simon and another major mall operator); then, outside of bankruptcy, Eddie Bauer, Izod, Geoffrey Beene and Van Heusen in 2021.

Meanwhile, Salter had been expanding his portfolio in new directions. In 2019, when Meredith put an atrophied Sports Illustrated up for sale, Salter swooped in. A few years before that, he’d also snapped up his first celebrity, who was still very much alive—Shaq—managing the basketball star’s name and image and bringing him on as an investor. In 2022, Salter and O’Neal—by then Authentic’s second-largest independent shareholder—were at Formula One’s Abu Dhabi race, when they spotted the CEO of German sportswear giant Adidas, which owned Reebok. O’Neal had been pushing Salter to buy the faded brand—the basketball star’s first product endorsement 30 years earlier—from the sneaker giant. Soon after the spontaneous Abu Dhabi exchange, Salter’s largest and riskiest deal went through.

Since Authentic is privately held and declined to share financial specifics for its various brands, it’s unclear exactly how lucrative each of Salter’s bets has proved. But there are plenty of indications his model is working, according to the company: Velour tracksuit relic Juicy Couture has been revived as a midpriced sportswear line whose online sales are up 60% since 2021, thanks in part to a shopping app and loyalty program. Nine West’s retail sales have climbed 42% since its 2018 acquisition, with expansion to more geographies and product lines. Barneys New York, once the commercial altar of the downtown designer crowd, is now licensed to Saks Inc., which operates Barneys shops within its own stores. (Pending the $2.65 billion acquisition underway of Neiman Marcus Group by the owner of Saks, Barneys is looking to unveil its own lines of apparel and home goods for distribution at Neiman Marcus, Saks Fifth Avenue and other luxury outlets.) Reebok, which was doing $3.7 billion in annual sales at the time of purchase, exceeded $5 billion during the past 12 months. And Brooks Brothers, Salter says, once the embodiment of the dapper man, has been reconstituted for the age of athleisure, its 363 stores selling everything from women’s and men’s workout clothes to kids’ bathing suits.

Authentic shareholders O’Neal, Beckham and Salter at a Sports Illustrated event tied to Formula One’s Las Vegas Grand Prix in 2023.Photographer: Ethan Miller/Getty Images

In November, Salter was on a Las Vegas terrace partying with O’Neal and Beckham. They were at Club SI, a three-day boozefest hosted by Sports Illustrated in a retrofitted Margaritaville, to watch F1 cars race down the Strip. Beckham struck a pose in his white tuxedo jacket as bulbs flashed. O’Neal muscled his 7-foot-2-inch frame through the crowd to greet attendees who’d each paid $7,000 for access. "The brand’s growing incredibly fast," said Salter, almost 2 feet shorter than the basketball star, as electronic dance music pumped through the pop-up nightclub. "Sports Illustrated is clearly back."

The onetime paragon of sports journalism wasn’t exactly back, but it was moving toward a new version of itself. When Salter purchased the media brand for $110 million, his plan was to blow it out into a global platform, helping recast him as a serious player in sports and entertainment. Through licensing deals he’d added business lines such as film and television studios, a live events business and a ticketing service, as well as SI-branded resorts in the Dominican Republic and one under construction in Orlando.

But a month after the Vegas bash, Salter found himself enmeshed in the kind of saga that lays bare brand licensing’s risks: He received the business-world equivalent of a ransom letter from an operating partner gone rogue. Authentic had been licensing Sports Illustrated to Arena Group, giving the publisher rights to the brand’s print magazine, swimsuit issue and digital properties. Arena, which also operates TheStreet financial news website and the entertainment magazine Parade, was saddled with debt and by 2023 needed a new investor to save it. After the billionaire behind 5-Hour Energy, Manoj Bhargava, seized control of Arena, he told Authentic he wasn’t going to pay its quarterly $3.75 million licensing fee.

The next month, Bhargava followed through on his threat, stiffing Authentic and laying off about 100 magazine staffers. It took Salter two months—and one $49 million publishing-rights lawsuit against Arena—to find a new licensee, but the damage was done. On the way out, Bhargava had shut down Sports Illustrated’s web pages, tanked ad revenue and urged third-party vendors to withhold customer data and other information, Authentic’s lawsuit says. The spectacle was covered play-by-play in the press. Then in June, Arena countersued Authentic, accusing it of "strip-mining its license partners" and seeking $200 million in damages for what it called the theft of its proprietary code and technology.

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While Salter has since found a trusted new partner, the fiasco reveals just how hard it is to become more than the dead-mall guy—and even that has had its challenges. In 2022 he bought British fashion label Ted Baker for about $250 million. Since then, two partners that were running the chain in different regions went bust, leading to liquidation sales and leaving Ted Baker’s store network decimated in both North America and the UK. Authentic was out its expected Ted Baker revenue as it searched for a new store operator licensee, starting from scratch on a process that usually takes months.

But Forever 21 might be Salter’s most humbling miscalculation. At an industry conference in January, he admitted that trying to compete in fast fashion—in which retailers including Zara USA Inc. and H&M Hennes & Mauritz AB convert runway trends into cheap copycats in a matter of weeks, rather than seasons—was his "biggest mistake." When Salter purchased Forever 21, Chinese retailers such as Shein and Temu were assembling supply chains in their home country that made Forever 21’s own design cycles look quaint. Authentic’s operating partner, Sparc, was being outmaneuvered, and by August 2023, Salter and Simon struck a deal for Sparc to form a partnership with Shein through an exchange of minority stakes in each business. Shein acquired about one-third of Sparc, and Sparc became a shareholder in Shein. Still, Forever 21 earlier this year was asking landlords for rent cuts of as much as 50% to help keep the lights on.

"Not every day is pretty," says Corey Salter, Authentic chief operating officer and Jamie’s son. "Not every partnership is perfect." Of Salter’s four sons who work for Authentic, Corey—a former concert and festival producer—will be most integral to whatever comes next, including the possible initial public offering, likely in the spring of 2026. This isn’t the first time Salter has talked up an IPO—he’s begun the process twice in recent years, before opting to take new rounds of private financing at higher valuations instead. "It’s time," Salter says of a public listing, noting plans could always change again.

These days, Authentic is refashioning itself from zombie retail king to "the world’s largest sports and entertainment licensing company"—an assertion now on its website. If potential investors buy what Authentic is selling, it could help justify a higher valuation. Frustrated or stalled efforts, like one into sports betting, reveal just how hard that kind of transformation may be. Then again, the nature of Salter’s model means even failures can be lucrative; the two Sports Illustrated partners with terminated contracts—Arena Group and a sports-betting partner that exited the US—may end up paying Authentic about $100 million in combined breakup fees. With math like that, it’s hard to lose. "I know that to Jamie it’s a competition. To me it’s also a competition," says O’Neal. "Disney is a powerhouse, so to be second behind them would really be something."


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