Streetwear M&A Dealing: VF Corp. Acquires Supreme Brand

The United States and much of the world watched all M&A activity grind to a halt during the first months of the coronavirus. The uncertainty of the US elections also slowed down the M&A market. Nevertheless, some notable deals did take place in certain sectors, including in streetwear.

VF Corp. (VFC) announced it would acquire streetwear brand Supreme in a transaction worth $2.1 billion. VFC is acquiring the New York-based company from its founder, James Jebbia, and private-equity firms Carlyle Group and Goode Partners.

Carlyle Group purchased 50% of the company for $500 million, valuing Supreme at $1 billion, in October 2017.

Supreme Makes Direct Sales of Streetwear

Supreme has made its mark by selling apparel, accessories, and footwear globally via direct-to-consumer channels, primarily digital.

Jebbia and the senior leadership team of the brand will remain with the company. The company is based in New York City, New York.

VF Corp. is the owner of streetwear brands such as Vans, The North Face, Timberland, and Dickies. VF Corp. sole the Vanity Fair brand of lingerie to Fruit of the Loom in 2007. After that, the company changed its name to VF Corp. The company’s origins date back to 1899.

The Company’s Backstory

Even prior to the merger, Supreme shed its cult status some time ago. They opened a retail location on Lafayette Street in downtown Manhattan in April 1994. Like the LA location, the New York location featured a huge skate bowl.

Supreme grew to be a streetwear brand preference for skaters and local artists.

In 2017, it partnered with Louis Vuitton on a high-profile collaboration and was a well-known brand beyond the skate community. Sales had reached roughly $200 million and were still growing fast. Skaters and fashion insiders said that the brand’s subcultural appeal was long gone. Although many may cry “sellout,” it looks like VF Corp is going to allow Supreme to retain its brand identity—one that’s made it the biggest name in streetwear over the past 25 years. The partnership intends to extend the brand’s reach internationally by opening up more flagships in new cities. It will also leverage its existing direct-to-consumer market.

Supreme Embraces “Light-Touch” Integration

“We talk about a light-touch integration with this business because it’s very successful, operating at a very high level today. We’ll take our time to get to know each other,” VF Corp chairman, president, and CEO Steve Rendle said in an official statement. “The streetwear brand will continue to operate as it always has; we do not look to come in and make any changes. We’re here to help, support and enable.”

Supreme’s Jebbia said in an official statement, “We are proud to join VF, a world-class company that is home to great brands we’ve worked with for years, including The North Face, Vans, and Timberland. This partnership will maintain our unique culture and independence, while allowing us to grow on the same path we’ve been on since 1994.”

No Big Streetwear Surge Likely, Some Say

Even with the news of this major deal, some market watchers caution not to expect an opening of the M&A floodgates.

But in August, there was another streetwear deal as Authentic Brands Group LLC (ABG), a global brand owner, marketing and entertainment company, and SPARC Group, LLC, a retail enterprise, announced that they’d acquired Lucky Brand. ABG partially owns SPARC. It’s the dedicated operating company for Aéropostale and Nautica.

The company said that with the acquisition, SPARC assumes the role of core licensee and operating partner for Lucky Brand and will oversee all sourcing, product design and development, wholesale, operations of the brand’s North American retail stores, and its e-commerce business.

Reebok as Target?

Plus, many streetwear observers believe that Reebok has a target on its back. The Financial Times reports that private equity firms are closely eying the sports outfitter Reebok. It’s rumored that the brand’s corporate parent, Adidas, is seeking to release itself from the long-term, clumsy relationship with its subsidiary. Permira and Triton have considered a move for Reebok, although it’s said that these advances are purely exploratory.

Reebok’s appeal to potential bidders is its comprehensive collection of classic footwear and apparel styles which may be a draw for younger consumers.

Adidas Concerned, Too

But these assets also concern Adidas, whose management executives is leery of the prospect of spinning out a potential rival.

Adidas continues to evaluate its options for Reebok. Adidas purchased the German sportswear maker purchased in 2005 for $3.8 billion. The transaction gave Adidas roughly 20% of the U.S. market and greater potential to better challenge leader Nike. However, Adidas hasn’t been able to boost the group’s overall sales.

“This is a once-in-a-lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry,” Adidas Chairman and CEO Herbert Hainer said at the time.

And now: “Overall as a company, we are not happy with the 2 per cent [sales] growth in 2019,” said Adidas chief financial officer Harm Ohlmeyer in March. “That is not according to our ambitions.”

Some in the industry say that other notable brands that could be targeted include Canada Goose and Deckers Brands.