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J Crew takeover

Discussion in 'Classic Menswear' started by sajohnson05, Nov 23, 2010.

  1. sajohnson05

    sajohnson05 Senior member

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  2. mack11211

    mack11211 Senior member

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    CEO Drexler is part of the deal. He made J Crew what it is in recent years. So long as he's' in charge, they should do the same things in the same way.
     
  3. patrickBOOTH

    patrickBOOTH Senior member Dubiously Honored

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    CEO Drexler is part of the deal. He made J Crew what it is in recent years. So long as he's' in charge, they should do the same things in the same way.

    It's good for me because I am a shareholder. They made me some money in the last few years. [​IMG]

    I am pro private companies. Issuing public equity is so expensive I can't see why many companies do it.
     
  4. GusW

    GusW Senior member Dubiously Honored

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    It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

    Unfortunately, private equity firms will often do the latter.
     
  5. Icarus

    Icarus Senior member

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    It's good for me because I am a shareholder. They made me some money in the last few years. [​IMG]

    I am pro private companies. Issuing public equity is so expensive I can't see why many companies do it.


    Access to capital markets and credibility. Private Co.s can have both, but being a public company provides liquidity and growth prospects to "smaller" companies.
     
  6. Icarus

    Icarus Senior member

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    It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

    Unfortunately, private equity firms will often do the latter.


    Yes, it's all about an exit. TPG was the founders' exit, ECM/IPO was TPG's exit, etc.

    It's obvious J. Crew will be public again.
     
  7. gdl203

    gdl203 Senior member Dubiously Honored Affiliate Vendor

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    I believe that several of SF darling brands are owned by PE shops. Filson comes to mind.
     
  8. gdl203

    gdl203 Senior member Dubiously Honored Affiliate Vendor

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    Issuing public equity is so expensive I can't see why many companies do it.
    What do you mean by this? Do you mean public company costs (additional reporting, legal costs, etc...)?
     
  9. Icarus

    Icarus Senior member

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    What do you mean by this? Do you mean public company costs (additional reporting, legal costs, etc...)?

    Most naysayers complain about initial compliance and ongoing costs. Sarbanes-Oxley compliance is not that much more expensive but it has certainly generated a lot of backlash. I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.
     
  10. gdl203

    gdl203 Senior member Dubiously Honored Affiliate Vendor

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    Most naysayers complain about initial compliance and ongoing costs. Sarbanes-Oxley compliance is not that much more expensive but it has certainly generated a lot of backlash. I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.

    Agree - costs could be heavy for micro-caps but don't move the needle for a large company like J Crew.

    Maybe he did mean the fees...

    That said, on a more fundamental basis, public investors require lower returns than private equity ones. So on a pure CAPM basis, the cost of equity of a public company is lower than that of a PE owned one.
     
  11. furo

    furo Senior member

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    I frequent J Crew often enough, but the only thing I've ever bought was their messenger bag. The rest of their product is just meh for the pricing.
     
  12. Nicola

    Nicola Senior member

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    I guess it has hurt smaller companies trying to get listed in the US since so many are going to Toronto and London for that. Maybe he means the underwriting fees.

    If you mean miners they've always listed TSE or before that VSE. To a lesser extent London.

    It's nothing to do with costs. Cdns always have a certain love of miners. VSE with it's small caps ranged from lottery players to crooks [​IMG]
     
  13. JayJay

    JayJay Senior member

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    I frequent J Crew often enough, but the only thing I've ever bought was their messenger bag. The rest of their product is just meh for the pricing.
    I'm not as impressed with them as I used to be. Lately I just quickly walk through their stores, and leave underwhelmed and empty-handed.
     
  14. madmadigan

    madmadigan Senior member

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    It all depends upon their strategy. If they leave the creative visionaries alone, it will be fine. But if they go and try to bleed every last dollar out of the creative departments to enhance short term profits then the product will be marginalized and eventually fade.

    Unfortunately, private equity firms will often do the latter.


    Exactly
     
  15. joneog

    joneog Well-Known Member

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    Or put another way: it's easier to sell the public (or their agents) over-priced garbage. PE guys a bit more discerning.
     
  16. gdl203

    gdl203 Senior member Dubiously Honored Affiliate Vendor

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    Or put another way: it's easier to sell the public (or their agents) over-priced garbage. PE guys a bit more discerning.

    Not at all what I said. And I also disagree.
     
  17. jblazing

    jblazing Active Member

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    Likely bad, because PE firms will bleed them. Oh well, I really liked shopping there the past 2 years. They have some really nice stuff.
     
  18. joneog

    joneog Well-Known Member

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    Not at all what I said. And I also disagree.

    If you require a lower return you're essentially paying a higher multiple... most people will pay higher multiples if the story is good... people pay more for the same nominal return, it costs the firm less (see, you don't even need a useless model like CAPM to figure these things out)

    You don't think PE firms are better at finding value than a mutual fund or someone with an Ameritrade acct?
     
  19. gdl203

    gdl203 Senior member Dubiously Honored Affiliate Vendor

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    I'd rather not get into this discussion too deep but your comments are essentially wrong. PE shops achieve higher returns in many ways (leverage, operational improvements, etc...), not by paying less than public investors - if that was the case, then there wouldn't be any take-private LBOs at premium to trading price, right? Like the J Crew one discussed here...?
     
  20. joneog

    joneog Well-Known Member

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    I'd rather not get into this discussion too deep but your comments are essentially wrong. PE shops achieve higher returns in many ways (leverage, operational improvements, etc...), not by paying less than public investors - if that was the case, then there wouldn't be any take-private LBOs at premium to trading price, right? Like the J Crew one discussed here...?

    I realize this is going further off topic but if you're comparing actuall returns(not theoretical required returns) even if the PE firm pays a premium they are still doing a better job at finding value because they have already taken into account those assymetries - they realize they can increase actual returns. The public still may be overpaying and PE underpaying if theres a premium for exactly some of the reasons you stated. Also, I'm speaking in general terms here; there are times that the public may own or buy under-priced securities because they became contrarians (usually by default) once the hype is gone, bad headlines hit, extraneous issues emerge etc; not necessarily because they are good at finding value.

    You don't see many deals at a discount because who wants to sell at a discount?

    I see where you're coming from but common sense tells you that PE guys have some information/knowledge advantages to the average guy out there and can better spot cheap assets.

    -jon
     

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