VF’s $2.1bn Acquisition of Supreme

By Jack Briody and James Muse (Columbia University), and Patrick Gorton, Shivaum Bapu, Daniel Winsor, Nicole Phung, Mohammed Safayat, Pristie Sharma and Gurneek Gill (UCL)

 

Overview of the deal


Acquirer: VF

Target: Supreme

Total Transaction Size: $2.1 Billion

Closed date: Expected 2020 year end

Acquirer advisor: Morgan Stanley

VF Corp (NYSE: VFC), owner of popular brands including Vans, North Face, and Timberland, announced on November 9th that it will pay $2.1 billion to purchase streetwear company Supreme. An additional payment of up to $300 million will be made subject to the satisfaction of post-closing milestones, bringing the possible total acquisition cost to $2.4 billion. Current investors Carlyle Group and Goode Partners are selling their interests in Supreme. Supreme is known for its distinct red rectangular logo with “Supreme” written in white. It has gained a substantial following among fans of streetwear. Products ranging from t-shirts and hoodies to branded fire extinguishers and bricks have sold out within seconds or minutes of launches. Perceived scarcity has led Supreme to its dominance among young people and allows it to charge significantly higher prices than other brands such as Nike or Vans. VF Corp estimates the streetwear market to be roughly $50 billion, and Supreme is at the center of this market. Management believes that Supreme will help bolster VF’s e-commerce business which is especially important as COVID-19 has altered retail shopping significantly. The deal is expected to close at the end of 2020 and contribute $500 million to VF’s revenue. VF Corp’s shares have jumped over 13% after the announcement of the deal. (Reuters)

“This scarcity, novelty and strong social influence model supports meaningful pricing power resulting best in class profitability.” - VF Corp Chief Executive Steve Rendle

Company Details: Acquirer – VF Corporation


Originally founded 121 years ago in 1899 as a glove and mitten manufacturing business in Pennsylvania, VF Corporation now owns a portfolio of 30 lifestyle apparel brands across a multitude of categories ranging from backpacks to sportswear to law-enforcement uniforms. It uses a direct-to-consumer business strategy, using a combination of brick-and-mortar and e-commerce retail stores which service customers across the globe. Some examples of its brands include: Dickies, JanSport, Vans, Timberland and The North Face.


Founded in 1899, headquartered in Denver, Colorado, USA

CEO: Steve Rendle

Number of employees: 50,000

Market Cap: $31.78b (as of 16/11/2020)

EV: $35.15b

LTM Revenue: $8.5b

LTM EBITDA: $0.93b

LTM EV/Revenue: 4.14x

LTM EV/EBITDA: 37.8x


Company Details: Target - Supreme


Supreme is an American skateboarding clothing and lifestyle brand with 11 stores spread over the US, England, France and Japan. It was originally established as a skatewear brand, then evolved into one of the world’s most popular and in-demand streetwear fashion brands. Its innovative business model involves ‘dropping’ a number of products from the current season every Thursday, in a quantity of 5-7, thereby supercharging the traditional supply-and-demand model. Once products are released online, they sell out in a matter of seconds, before quickly appearing on resale websites often marked up ten times the initial price. In 2017, Supreme sold a roughly 50% stake to The Carlyle Group, a private equity firm, for US$500 million.