September 10, 2013 9:23 am

Reed Krakoff in $50m buyout

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Fashion designer Reed Krakoff has led US investors in a management buyout of his namesake business from former parent Coach in a $50m deal.

Mr Krakoff resigned from Coach and took control of the luxury brand on August 30, with minority investors Mitch Rales, Mark Ein and T Rowe Price, after months of talks with the US accessories brand.

After the decision to spin off the label was announced in April, Coach said it would reduce Mr Krakoff’s annual bonus by $3m in the summer if an agreement on the sale was not reached by July 29.

Coach said this week that it would retain a minority stake in Reed Krakoff, which sells luxury items such as $1,200 alligator print sweatshirts and tote leather handbags for $3,300. Coach launched the company with Mr Krakoff in 2008.

Mr Krakoff spent 16 years at the helm of Coach’s creative management, and has been widely credited for his role in a turnround at the New York-based company which has a market capitalisation of $15bn.

Mr Krakoff, who will show his latest seasonal collection at New York Fashion Week on Wednesday, has become Reed Krakoff’s largest shareholder and will serve as creative director. Valerie Hermann will continue as chief executive and Mr Ein, founder and chief executive of Venturehouse Group, will become chairman.

“Part of our decision to pursue this deal has been our belief that when management takes ownership of a business, it makes a sizeable difference to its growth story,” Mr Ein told the Financial Times.

He believes the company is carving out a profitable new niche in the crowded global luxury market.

“Although there are plenty of American ‘accessible luxury’ labels, very few at the high end are yet to compete successfully with European rivals – we see a huge opportunity for significant expansion that builds on the foundations of the last four years,” he said.

Henry Ellenbogen, portfolio manager at T Rowe Price, a mutual fund that has invested in successful US luxury retail companies such as Tory Burch and Michael Kors, said: “We have an extremely strong record in the sector and see this business as a future force to be reckoned with on a global scale.”

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