UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: June 25, 2014
(Date of earliest event reported)
SEQUENTIAL
BRANDS GROUP, INC.
(Exact name of
registrant as specified in its charter)
Delaware |
|
000-16075 |
|
86-0449546 |
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(I.R.S. Employer
Identification No.) |
1065 Avenue of the Americas, 30th Floor,
New York, NY 10018
(Address of Principal Executive Offices/Zip
Code)
(646) 564-2577
(Registrant’s telephone number,
including area code)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events.
On June 25, 2014, Sequential Brands Group,
Inc. (the “Company”) issued a press release announcing the execution of a definitive agreement to acquire Galaxy Brand
Holdings, Inc. (“Galaxy”) for $100 million in cash (subject to adjustment), 13.75 million shares of common stock of
the Company and certain performance based warrants. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
Forward-Looking
Statements
Certain statements in this press release
and oral statements made from time to time by representatives of the Company are forward-looking statements (“forward-looking
statements”) within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the timing
and likelihood of the Galaxy acquisition, the expected effects of the Galaxy acquisition on the Company’s revenues, earnings
and brands and the expected financing for the acquisition. These forward-looking statements are made as of the date hereof and
are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Our
actual results could differ materially from those stated or implied in forward looking statements. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events,
performance or products, underlying assumptions and other statements that are not historical in nature, including those that include
the words “subject to,” “believes,” “anticipates,” “plans,” “expects,”
“intends,” “estimates,” “forecasts,” “projects,” “aims,” “targets,”
“may,” “will,” “should,” “can,” the negatives thereof, variations thereon and similar
expressions. Such forward-looking statements reflect the Company’s current views with respect to future events, based on
what the Company believes are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject
to known and unknown risks and uncertainties, including risks and uncertainties discussed in the reports that the Company has filed
with the Securities and Exchange Commission (the “SEC”); risks related to the proposed transaction, including the ability
to consummate the merger and the timing of the closing of the merger; general economic, market, or business conditions; changes
in the Company’s competitive position or competitive actions by other companies; the Company’s ability to maintain
strong relationships with its licensees; the Company’s ability to retain key personnel; the Company’s ability to achieve
and/or manage growth and to meet target metrics associated with such growth; the Company’s ability to successfully attract
new brands; the Company’s ability to identify suitable targets for acquisitions; the Company’s ability to obtain financing
for the acquisitions on commercially reasonable terms; the Company’s ability to integrate successfully the new acquisitions
into its ongoing business; and the ability to achieve the anticipated results of the proposed transaction and other potential acquisitions;
the Company’s ability to comply with government regulations; changes in laws or regulations or policies of federal and state
regulators and agencies; and other circumstances beyond the Company’s control. Refer to the section entitled “Risk
Factors” set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as well as the
Company’s Quarterly Reports on Form 10-Q and other SEC filings for a discussion of important risks, uncertainties and other
factors that may affect our business, results of operations and financial condition. The Company’s stockholders are urged
to consider such risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not
to place undue reliance on such forward-looking statements. Forward-looking statements are not, and should not be relied upon as,
a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by
which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those
expressed in forward-looking statements. The Company is under no obligation to, and expressly disclaims any such obligation to,
update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information about the Proposed Transaction
and Where to Find It
In connection with the proposed transaction,
the Company intends to file with the SEC an information statement of the Company in accordance with Regulation 14C of the Securities
Exchange Act of 1934, as amended. The Company also plans to file other relevant documents with the SEC regarding the proposed transaction.
INVESTORS ARE URGED TO READ THE INFORMATION STATEMENT AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a copy, without charge, of the information statement (if and
when it becomes available) and other relevant documents filed by the Company with the SEC at the SEC’s website at www.sec.gov.
You may also obtain these documents, without charge, by contacting the Company’s Investor Relations department at 1065 Avenue
of the Americas, 30th Floor, New York, New York 10018, Tel: (646) 564-2577.
Item 9.01 Financial Statements
and Exhibits.
(d) The following exhibits are filed
as a part of this Report.
Exhibit No. |
|
Description |
99.1 |
|
Press Release of Sequential Brands Group, Inc. dated June 25, 2014. |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
SEQUENTIAL BRANDS GROUP, INC. |
|
|
|
|
|
|
Date: June 25, 2014 |
|
|
|
By: |
/s/ Gary Klein |
|
|
Name: Gary Klein |
|
|
Title: Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
|
Description |
99.1 |
|
Press Release of Sequential Brands Group, Inc. dated June 25, 2014. |
Sequential Brands Group Signs Definitive
Agreement to Acquire Galaxy Brand Holdings
Transformational Acquisition Increases
Sequential’s Portfolio from 8 to 12 brands with the addition of Avia®, AND1®, Nevados®
and Linens ‘N Things®
| · | Annual
Global Retail Sales for Sequential’s brands expected to grow from approximately $1 Billion to nearly $2 Billion |
| · | Carlyle Group, majority owner of Galaxy Brand Holdings, to become
significant shareholder in Sequential |
| · | Forward looking twelve month revenue run rate of Sequential expected
to increase from range of $28 - $30 million to approximately $56 – $60 million |
| · | Forward looking twelve month projected Adjusted EBITDA run rate expected
to increase to $36 - $40 million |
| · | Debt financing for the transaction led by Bank of America and affiliates
of Blackstone Group |
NEW YORK – June 25, 2014 – Sequential Brands
Group, Inc. (NASDAQ:SQBG) (“Sequential” or the “Company”) announced today that it has signed a definitive
agreement to acquire Galaxy Brand Holdings, Inc. (“Galaxy”) for $100 million in cash, 13.75 million shares of common
stock of the Company, and certain performance based warrants. This transformational acquisition will position Sequential as one
of the largest pure-play brand licensing companies in the world, with a portfolio of twelve global consumer brands generating nearly
$2 billion in global retail sales annually. The transaction, which is expected to close by the end of 2014, is subject to customary
closing conditions and regulatory approval.
In the transaction, Sequential will acquire
four well-known consumer brands that include the fitness brand Avia®, basketball brand AND1®, outdoor brand Nevados®,
and home goods brand Linens ‘N Things®.
Galaxy currently has over 15 licensees
with significant business at Walmart coupled with complementary distribution to a wide range of mid-tier and specialty retailers.
Yehuda Shmidman, CEO of Sequential, commented,
“This merger is a game changer for Sequential, as it doubles the scale of our brand portfolio and further diversifies our
licensee and distribution platform. We were attracted to these four brands for both their existing licensing base as well as the
strong prospects for continued organic growth in the future.”
“We are thrilled that this acquisition
also brings the expertise of Eddie Esses and the Galaxy team who will continue to lead the business for the newly acquired brands,”
added Shmidman.
On
a combined basis post-closing, the Company is projecting forward 12-month royalty revenues of $56 - $60 million and $36 - $40 million
of Adjusted EBITDA from the total brand portfolio of 12 brands.
Eddie Esses, CEO of Galaxy Brand Holdings,
stated, “I am excited about building upon Sequential’s success and continuing to expand and strengthen our brands.
The combination of our brand portfolios together as one unified force is very powerful.”
Global alternative asset manager The Carlyle
Group, which has a majority interest in Galaxy, will be granted one seat on Sequential’s Board of Directors and will become
a significant shareholder in the Company post-transaction.
William Sweedler, Chairman of Sequential,
commented “The roadmap and execution playbook outlined approximately two years ago has been followed aggressively. I’m
very proud of the Sequential management team and look forward to Rodney Cohen, Managing Director and Co-Head of Carlyle Growth
Partners and Carlyle Equity Opportunity Fund, joining the Board of Directors.”
The Company has obtained committed financing
from Bank of America and GSO Capital Partners LP, an affiliate of Blackstone Group. The Company will be replacing its existing
debt facilities with new first lien and second lien debt facilities totaling approximately $180 million.
Additionally, upon completion of this transaction, the Company’s diluted share count will be approximately 40 million. The
transaction is expected to close by the end of 2014, and is expected to be immediately accretive.
The deal team that represented Sequential
during the acquisition was led by Tengram Capital Partners. Consensus Advisors provided a fairness opinion to the Board of Directors.
Further details will be provided upon closing.
ABOUT SEQUENTIAL BRANDS GROUP, INC.
Sequential Brands Group, Inc. (Nasdaq:SQBG) owns, promotes,
markets, and licenses a portfolio of consumer brands that presently includes William Rast®, People's Liberation®, DVS®,
Heelys®, Caribbean Joe®, Ellen Tracy®, Revo® and The Franklin Mint®. Sequential seeks to ensure that its brands
continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends
to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and
in certain international territories. For more information, please visit Sequential's corporate website: www.sequentialbrandsgroup.com. To
inquire about licensing opportunities, please email: newbusiness@sbg-ny.com.
Non-GAAP Financial Measures:
This press release contains certain non-GAAP
financial measures. A reconciliation of these non-GAAP measures to their nearest comparable GAAP measure is included in the tables
following this press release. As described more fully below, we believe the use of non-GAAP measures in addition to GAAP measures
is an additional useful method of evaluating our financial condition and results of operations. The non-GAAP financial measures
disclosed should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and
the expected results calculated in accordance with GAAP and reconciliations to those expected results should be carefully evaluated.
The non-GAAP financial measures we use may be calculated differently from, and therefore may not be comparable to, similarly titled
measures used by other companies.
Forward-Looking Statements
Certain statements in this press release
and oral statements made from time to time by representatives of the Company are forward-looking statements ("forward-looking
statements") within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the timing
and likelihood of the Galaxy acquisition, the expected effects of the Galaxy acquisition on the Company’s revenues, earnings
and brands and the expected financing for the acquisition. These forward-looking statements are made as of the date hereof and
are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Our
actual results could differ materially from those stated or implied in forward looking statements. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events,
performance or products, underlying assumptions and other statements that are not historical in nature, including those that include
the words "subject to," "believes," "anticipates," "plans," "expects," "intends,"
"estimates," “forecasts,” “projects,” “aims,” “targets,” "may,"
"will," "should," "can," the negatives thereof, variations thereon and similar expressions. Such
forward-looking statements reflect the Company's current views with respect to future events, based on what the Company believes
are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject to known and unknown
risks and uncertainties, including risks and uncertainties discussed in the reports that the Company has filed with the Securities
and Exchange Commission (the “SEC”); risks related to the proposed transaction, including the ability to consummate
the merger and the timing of the closing of the merger; general economic, market, or business conditions; changes in the Company’s
competitive position or competitive actions by other companies; the Company’s ability to maintain strong relationships with
its licensees; the Company’s ability to retain key personnel; the Company’s ability to achieve and/or manage growth
and to meet target metrics associated with such growth; the Company’s ability to successfully attract new brands; the Company’s
ability to identify suitable targets for acquisitions; the Company’s ability to obtain financing for the acquisitions on
commercially reasonable terms; the Company’s ability to integrate successfully the new acquisitions into its ongoing business;
and the ability to achieve the anticipated results of the proposed transaction and other potential acquisitions; the Company’s
ability to comply with government regulations; changes in laws or regulations or policies of federal and state regulators and agencies;
and other circumstances beyond the Company’s control. Refer to the section entitled "Risk Factors" set forth in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as well as the Company’s Quarterly Reports
on Form 10-Q and other SEC filings for a discussion of important risks, uncertainties and other factors that may affect our business,
results of operations and financial condition. The Company's stockholders are urged to consider such risks, uncertainties and factors
carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Forward-looking
statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove
to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes
and results may differ materially from those expressed in forward-looking statements. The Company is under no obligation to, and
expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information,
future events or otherwise.
For
media inquiries, contact:
Sequential Brands Group
Jaime Cassavechia
212-518-4771 x108
jcassavechia@sbg-ny.com
For investor relations, contact:
ICR
John Rouleau/Rachel Schacter
203-682-8200
John.Rouleau@icrinc.com
Rachel.Schacter@icrinc.com
Non-GAAP Financial Measure Reconciliation
(in thousands)
| |
(Unaudited) | |
| |
Projected Next Twelve Months Post Closing (a) | |
| |
High | | |
Low | |
| |
| | |
| |
GAAP net income | |
$ | 10,140 | | |
$ | 7,640 | |
| |
| | | |
| | |
Adjustments: | |
| | | |
| | |
Cash interest expense, net | |
| 11,498 | | |
| 11,498 | |
Non-cash interest expense | |
| 872 | | |
| 872 | |
Write-off of deferred financing costs | |
| 1,615 | | |
| 1,615 | |
Depreciation and amortization | |
| 1,700 | | |
| 1,700 | |
Taxes | |
| 6,084 | | |
| 4,584 | |
Estimated deal costs and other (b) | |
| 6,591 | | |
| 6,591 | |
Non-cash compensation | |
| 1,500 | | |
| 1,500 | |
| |
| 29,859 | | |
| 28,359 | |
| |
| | | |
| | |
Adjusted EBITDA (1) | |
$ | 40,000 | | |
$ | 36,000 | |
| |
(Unaudited) | |
| |
Projected Next Twelve Months Post Closing (a) | |
| |
High | | |
Low | |
| |
| | |
| |
GAAP net income | |
$ | 10,140 | | |
$ | 7,640 | |
| |
| | | |
| | |
Adjustments: | |
| | | |
| | |
Estimated deal costs and other (b) | |
| 6,591 | | |
| 6,591 | |
Write-off of deferred financing costs | |
| 1,615 | | |
| 1,615 | |
Tax effect of above items | |
| (3,077 | ) | |
| (3,077 | ) |
Total non-GAAP adjustments | |
| 5,128 | | |
| 5,128 | |
| |
| | | |
| | |
Non-GAAP net income (2) | |
$ | 15,269 | | |
$ | 12,769 | |
| |
(Unaudited) | |
| |
Projected Next Twelve Months Post Closing (a) | |
DILUTED EPS: | |
High | | |
Low | |
| |
| | |
| |
GAAP earnings per share | |
$ | 0.25 | | |
$ | 0.19 | |
| |
| | | |
| | |
Adjustments: | |
| | | |
| | |
Estimated deal costs and other (b) | |
$ | 0.16 | | |
$ | 0.16 | |
Write-off of deferred financing costs | |
$ | 0.04 | | |
$ | 0.04 | |
Tax effect of above items | |
$ | (0.08 | ) | |
$ | (0.08 | ) |
Total non-GAAP adjustments | |
$ | 0.13 | | |
$ | 0.13 | |
| |
| | | |
| | |
Non-GAAP earnings per share (2) | |
$ | 0.38 | | |
$ | 0.32 | |
| (1) | Adjusted EBITDA is defined as net income, excluding interest
income or expense, income taxes, depreciation and amortization, and excluding estimated deal costs and other, write-off of deferred
financing costs and non-cash compensation. Management uses Adjusted EBITDA as a measure of operating performance to assist in
comparing performance from period to period on a consistent basis and to identify business trends relating to the Company's financial
condition and results of operations. The Company believes Adjusted EBITDA provides additional information for determining
its ability to meet future debt service requirements and capital expenditures. |
| (2) | Non-GAAP net income and non-GAAP net income per share
are non-GAAP financial measures which represent net income excluding estimated deal costs and other and write-off of deferred
financing costs. Management uses this information to measure performance over time on a consistent basis and to identify
business trends relating to the Company's financial condition and results of operations. Management believes that these
non-GAAP measures provide investors with information regarding the underlying performance of the Company's core business operating
results on a cash basis. Amounts may not foot due to rounding. |
| (a) | Projected next twelve months for after the transaction
closes. The transaction is expected to close before the end of 2014. Because of the uncertainty of the closing
date of the acquisition, the Company cannot estimate the financial impact on the current year. |
| (b) | Represents deal and other one-time costs related to the
Company's acquisition transactions primarily related to legal, advisory and accounting that are not representative of the Company's
day-to-day licensing business. |
Sequential Brands (NASDAQ:SQBG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Sequential Brands (NASDAQ:SQBG)
Historical Stock Chart
From Jul 2023 to Jul 2024