True Religion Apparel Inc., the maker of designer jeans worn by Megan Fox and Angelina Jolie, agreed to be bought by TowerBrook Capital Partners LP for about $835 million.
The $32-a-share offer is 8.7 percent more than True Religion’s closing price on May 9. The deal is expected to be completed in the third quarter, the Vernon, California-based company said yesterday in a statement.
True Religion, which hired Guggenheim Partners in October to evaluate a possible sale, has lost female customers after maintaining higher prices than competitors such as VF Corp.’s 7 for All Mankind label. While revenue increased 11 percent last year, True Religion’s profitability has shrunk. Operating margin narrowed to 16.7 percent last year from 33.2 percent in 2005.
“It’s probably worth a little more, somewhere between the mid- to high $30s, but they’re buying them, and it is a valuable brand,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC, an asset manager and merger adviser in New York. “We are in an upswing in the economy, and the time to buy things is when things are recovering.”
The shares rose 8.1 percent to $31.82 at the close in New York yesterday. They have gained 25 percent this year. The stock closed at an all time high of $37.29 on Feb. 7, 2012.
TowerBrook is a New York-based private-equity firm founded by Ramez Sousou and Neal Moszkowski, who also serve as co-CEOs. Its previous retail investments include the Jimmy Choo Ltd luxury brand, acquired by Labelux GmbH in 2011.
True Religion’s women’s Cameron Vintage “Boyfriend” jeans cost $317 for a pair, while the women’s Carrie Patchwork Flare jean are listed at $323, according to the company’s website.
True Religion was founded in 2002 by Jeffrey Lubell, who began embellishing jeans as a teen growing up in New York. He took the company public the following year, according to its website. True Religion operated 124 stores in the U.S. and 31 international locations as of March 31.
“We’re happy and we think this is potentially a fair price,” said Ashley Abney, an analyst at River Road Asset Management LLC, which has about $10 billion under management including True Religion shares. “The stock hasn’t traded at a multiple like this in a while.”
True Religion yesterday also reported first-quarter profit that trailed analysts’ estimates. Profit, excluding costs related to the review of strategic alternatives and executive separation expenses, totaled 22 cents a share. Analysts projected 34 cents, the average of estimates compiled by Bloomberg. Sales rose 13 percent to $120.8 million, while same-store sales increased 0.7 percent.
Deutsche Bank AG, Jefferies Group LLC and UBS AG acted as financial advisers to TowerBrook, while Wachtell, Lipton, Rosen & Katz served as legal counsel.
Guggenheim Securities served as financial adviser to True Religion and the special committee of the board, while Greenberg Traurig LLP and Akin Gump Strauss Hauer & Feld LLP provided legal advice.