December 22, 2022 – Further to the Court’s August 31st bidding procedures order [Docket No. 141] and an auction held on December 20th, the Court hearing the GBG USA cases approved the sale of the Debtors' Sean John assets (cash purchase price of $7.551mn plus certain "Assumed Liabilities") to SLC Fashion LLC (the “Purchaser”) [Docket No. 432]. The asset purchase agreement (the “APA”) governing the terms of the sale is attached to the order as Exhibit 1 (an amendment to this December 1st agreement to reflect the increased purchase price does ot appear to have been filed yet).
The Purchaser is an entity created by CeOpCo, LLC (the “Ce” for Combs Enterprises) and is controlled by Sean “Diddy” Combs, the rapper turned entrepreneur. On December 1st, GBG Sean Jean LLC, which had not previously been part of the Debtors’ Chapter 11 cases filed its bankruptcy petition and requested joint administration of its case.
On December 2nd, the Debtors filed a notice designating the now Purchaser as its stalking horse with a $3.3mn bid [Docket No. 382]. The Purchaser's role of pacing the auction process was briefly usurped when the Debtors designated the bids of competing bidders One Step Up and Allura Imports (each with a cash bid of $3.6m) as the starting bids for the Sean John assets. The December 20th auction ultimately involved four parties (adding eventual back-up bidder United Ventures to the mix). A declaration in support of the sale filed by the Debtors' investment banker Ducera provides further detail as to the auction process [Docket No. 427]
Key Terms of APA
- Sellers: GBG Sean John LLC and Pacific Alliance USA Inc
- Purchaser: SLC Fashion LLC
- Purchase Price: SLC Fashion LLC has submitted the Successful Bid for a cash purchase price of $7.551mn plus certain Assumed Liabilities.
- Bid Protections:
- Reimbursement up to $33,000 of the actual, reasonable, and documented out-of-pocket fees and expenses incurred by the Purchaser (the “Expense Reimbursement”), which represents 1.0% of the cash portion of the Purchase Price; plus
- A fee of $99,000 less the amount of any Expense Reimbursement (the “Break-Up Fee”, and together with the Expense Reimbursement, the “Bid Protections”), which represents 3.0% of the cash portion of the Purchase Price.
Back-Up Bid
- Back-Up Bidder: United Ventures, LLC
- Purchase Price: Designated Back-Up Bid for a cash purchase price of $7.50 million plus certain Assumed Liabilities.
Background
On December 2, 2021, Further to the Court’s August 31th bidding procedure order [Docket No. 141], the Debtors filed a notice (i) designating SLC Fashion LLC as the stalking horse bidder (the “Stalking Horse Bidder,” $3.3mn bid) for certain of their Sean John brand assets held by newly designated Debtor GBG Sean John LLC (the “Seller” or “Sean John”) and (ii) providing the Stalking Horse Bidder with certain bidding protections [Docket No. 382].
The Stalking Horse Bidder is an entity created by CeOpCo, LLC (the “Ce” for Combs Enterprises) and is controlled by Sean “Diddy” Combs, the rapper turned entrepreneur. On December 1st, the Seller, which had not previously been part of the Debtors’ Chapter 11 cases filed its bankruptcy petition and requested joint administration of its case.
The Debtors note as to the rationale for not including the Seller as a debtor when they filed at they end of July: “Sean John was not included in the initial filing given that, at that time, the Debtors did not have requisite consent from their joint venture partner to file the entity for bankruptcy.” They now have that consent from that joint venture partner, i.e., Sean Combs. Not noted as to the previously lacking “requisite consent” was that the Combs/GBG relationship, begun in November 2016 when the Debtors purchased 90% of Sean John for an undisclosed sum, has not been without tension. In February 2021, Combs launched a pair of lawsuits against GBG in a New York federal court alleging that GBG was misrepresenting Combs’ association with a brand that GBG had launched in the UK and misusing IP rights.
The Sean John APA is attached to the notice as Exhibit A.
Further Background
A declaration filed in support of the stalking horse declaration [Docket No. 383] provides: “As a crown jewel asset of their portfolio, the Debtors also contemplated selling their Sean John brand — the Debtors’ joint venture with celebrity Sean Combs — as part of these chapter 11 cases. However, given that Sean John was not an Initial Debtor, the Debtors had planned to structure the Sean John sale as a stock sale of the Debtors’ 90% equity stake in the Sean John joint venture. In the months leading up to the Petition Date, the Debtors and their advisors considered whether Sean John should also file for chapter 11 protection. While an obligor under the Debtors’ prepetition secured credit facilities, Sean John was not included in the initial filing given that, at that time, the Debtors did not have requisite consent from their joint venture partner to file the entity for bankruptcy.
While several potential bidders expressed interest in the Sean John brand, as the marketing process developed over the past several months it became apparent that selling the Debtors’ equity in a non-debtor entity presented significant obstacles for certain bidders, posed execution risk, and stifled competition. To better facilitate a value-maximizing transaction, the Debtors began exploring the possibility of filing Sean John so that the sale could be implemented through these chapter 11 cases. After consulting with their advisors, board of directors, the Official Committee of Unsecured Creditors and their secured lenders, the Debtors determined that filing Sean John and pivoting to a 363 asset sale would maximize value and was in the best interests of their estates.
Following this extensive, months-long multi track negotiation process, the Debtors’ efforts ultimately culminated with the execution of that certain asset purchase agreement (the “Stalking Horse APA”), dated as of December 1, 2021, for the sale of the Sean John assets to SLC Fashion, LLC, an acquisition vehicle affiliated with Sean Combs, the Debtors’ joint venture partner for Sean John…”
Sean John is a Delaware limited liability company created in November 2016. It is a joint venture entity — 90% owned by Debtor GBG USA Inc., as a Class A Member, and 10% owned by Christian Casey LLC and Jessie and D Lila LLC, as Class B Members [named after three of Combs’ children].”
Combs Enterprises describes the Sean John brand as follows: “Sean John is a fashion and lifestyle brand created by Sean ‘Diddy Combs. Since its launch in 1998, Sean John has grown into an international megabrand and a staple of American fashion and lifestyle, now serving 18 product categories. Sean John has been praised for its innovative approach and received numerous awards and accolades including being named Best Menswear Designer of the Year by The Council of Fashion Designers of America in 2004, and twice receiving the FiFi Award for its fragrances (Unforgivable in 2007, I AM KING in 2009). Sean John has licensing deals with the GBG, PVH, Marchon and others. Since 2010, Macy’s has been the largest distributor of the Sean John brand including sportswear, dress shirts, ties, and kids wear to name a few, both in stores and online. Sean John also owns Enyce, a Hip-Hop inspired clothing brand."
About the Debtors
GBG USA is a company incorporated under the laws of Delaware and is an indirect wholly owned subsidiary of the Company. GBG USA is primarily engaged in operating the wholesale and direct-to-consumer footwear and apparel business in North America.
About Global Brands Group Holding Limited
Global Brands Group Holding Limited (SEHK Stock Code: 787) is a leading branded apparel and footwear company. The Group designs, develops, markets and sells products under a diverse array of owned and licensed brands.
The Group’s Europe wholesale business operates under legal entities entirely separate and independent from the wholesale business in North America. It primarily supplies apparel, footwear and accessories to retailers and consumers across Europe under licenses separately entered into by the Europe entities of the Group. The Group’s global brand management business operates on a different business model and is distinctly separate from the wholesale businesses in North America and Europe.
Global Brands’ innovative design capabilities, strong brand management focus, and strategic vision enable it to create new opportunities, product categories and market expansion for brands on a global scale.
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