Toms, the company that donates a pair of shoes to a needy child for every pair it sells, agreed to sell half of itself to private-equity firm Bain Capital LLC to fund an expansion of its operations in the U.S. and overseas.
The investment values the closely held shoemaker at about $625 million, including debt, according to a person familiar with the situation, who asked not to be named because financial terms of the deal weren’t publicly disclosed. Blake Mycoskie, who founded Toms, will retain a 50 percent stake, the companies said in a statement yesterday.
“This partnership will enable Toms to grow faster and give to more people in more ways than we could otherwise,” Mycoskie said in the statement.
He established Toms after traveling to Argentina in 2006 and finding that many of the children in the village he was visiting had no shoes. The company, based in Los Angeles, has given away more than 25 million pairs of new shoes to children since its founding, and said its eyewear division has helped save or restore the sight of more than 250,000 people.
Bain’s investment will help Toms expand its distribution in Europe and Asia as well as in the U.S., which includes increasing the chain’s retail stores from the current two locations, Ryan Cotton, a principal at the buyout firm who helped lead the investment, said in a telephone interview. Bain also plans to help Toms expand its product lines in offerings like apparel and household items.
“Blake found that for-profit and a bottom-line focus didn’t have to be in conflict with for-good,” Cotton said. “That has deep, real resonance with the consumer. Our investment thesis is taking the brand and extending it into a lot of places we’re pretty convinced it has license to go.”
Mycoskie didn’t respond to a request seeking comment about the company’s growth plans. Alex Stanton, a spokesman for Bain at Stanton Public Relations & Marketing, declined to comment on Toms’ valuation.
Toms’ two stores are in Venice, California, and Austin, Texas. It also sells products online and through national retailers like Nordstrom Inc. and Whole Foods Market Inc., as well as in locally owned boutiques.
The company’s business model, what retail consultants have coined compassionate consumerism, has inspired imitations from established brands. Skechers USA Inc. introduced its BOBS label, Benefiting Others By Shoes, and Urban Outfitters Inc. stores feature apparel by Threads for Thought, which gives part of its sales proceeds to humanitarian groups.
It’s an angle that has appealed to millennials, shoppers in their late 20s and early 30s, who lack the means to make big donations and admire brands that promote a save-the-planet ethos. It’s also a way for retailers to stand out on Main Street, as apparel chains struggle to entice shoppers reluctant to spend as wage gains remain sluggish.
Toms’ success has also drawn the attention of retailers seeking to hire talent. Laurent Potdevin left his position as Toms’ president to become chief executive officer of Lululemon Athletica Inc., the yogawear retailer, in January.
Bain is making the investment in Toms from its 11th buyout fund, a $7.3 billion pool it finished raising in April. The firm has invested in consumer and retail companies including coat-maker Canada Goose Inc., Gymboree Corp. and Burlington Stores Inc.
Mycoskie will give away at least half of his profit from the sale, according to the statement. Part of that money will go toward starting a fund to support social entrepreneurship. Bain, which is based in Boston and has more than $75 billion of assets under management, will match his investment in the fund.
“We believe that the one-for-one promise is fundamental to the brand,” Cotton said. “So it occurred to us that if we were to be partners in Toms, it would be really important for us and Blake to walk the walk.”