UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2017
Iconix Brand Group, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-10593 | 11-2481093 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 1450 Broadway, New York, NY | 10018 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (212) 730-0030
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. |
On May 9, 2017, Iconix Brand Group, Inc. (the “Company”) signed agreements to sell to DHX Media Ltd. (“DHX”) the Company’s entertainment division, which includes an 80% interest in the Peanuts® brand and a 100% interest in the Strawberry Shortcake® brand, for a total purchase price of $345 million, subject to a customary working capital adjustment. The remaining 20% interest in Peanuts® will continue to be held by members of the family of Charles M. Schulz. The sales were made pursuant to the Membership Interest Purchase Agreement between the Company, Icon NY Holdings, LLC (“Icon NY”), IBG Borrower LLC (“IBG Borrower,” and collectively with the Company and Icon NY, the “Sellers”), DHX and DHX SSP Holdings LLC (“DHX SSP,” and collectively with DHX, the “Purchasers”) and the Membership Interest Purchase Agreement, between the Company, IBG Borrower, DHX and DHX SSP, each dated as of May 9, 2017 (collectively, the “Agreements”). The Agreements contain representations, warranties and covenants of the Sellers and the Purchasers and post-closing indemnification rights of the Sellers and the Purchasers customary for transactions of this type. The closing of the transaction is subject to satisfaction of customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close between the end of the second quarter and the beginning of the third quarter of 2017.
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
As a result of the transaction described in Item 1.01 above, the Company is required to make principal prepayments of approximately (i) $152.2 million in the aggregate on its Series 2012-1 4.229% Senior Secured Notes, Class A-2 and Series 2013-1 4.352% Senior Secured Notes, Class A-2 (collectively the “Senior Secured Notes”), in accordance with the terms of the Senior Secured Notes, and (ii) $135.3 million on its senior secured term loan under the Credit Agreement dated as of March 7, 2016 between IBG Borrower, the Company and certain of IBG Borrower’s wholly-owned subsidiaries, Cortland Capital Market Services LLC and the lenders party thereto (the “Senior Secured Term Loan”), in accordance with the terms of the Senior Secured Term Loan. Additionally, the Company is required to pay a principal prepayment premium of $15.7 million in accordance with the terms of the Senior Secured Term Loan.
| Item 7.01 | Regulation FD Disclosure. |
On May 10, 2017, the Company issued a press release announcing execution of the Agreements in respect of the transaction described in Item 1.01, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, regardless of any general incorporation language in those filings. In addition, the press release contains statements intended as “forward-looking statements” which are subject to the cautionary statements about forward-looking statements set forth in such press release.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99.1 | Press release of Iconix Brand Group, Inc., dated May 10, 2017.* |
| * | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ICONIX BRAND GROUP, INC. | ||||
| By: | /s/ Jason Schaefer | |||
| Name: | Jason Schaefer | |||
| Title: | Executive Vice President and General Counsel | |||
Date: May 16, 2017
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press release of Iconix Brand Group, Inc., dated May 10, 2017.* | |
| * | Furnished herewith. |
Exhibit 99.1
Iconix Brand Group Announces Sale of Peanuts and Strawberry Shortcake Brands
- Entertainment sale strengthens Iconix’ financial condition
- Proceeds plus cash to pay down debt; transactions will be earnings neutral
- Focusing resources to drive growth in fashion, active and home
NEW YORK, May 10, 2017 /PRNewswire/ — Iconix Brand Group, Inc. (Nasdaq: ICON) (“Iconix” or the “Company”), today announced that it has entered into a definitive agreement to sell its interest in the Peanuts and Strawberry Shortcake brands to DHX Media Ltd. for $345 million in cash, subject to a customary working capital adjustment.
John Haugh, Chief Executive Officer of Iconix, said, “One of our strategic objectives has been to de-lever and strengthen our balance sheet. This sale aligns with this objective. As we monetize the value we have created in our entertainment business, we can reduce our debt and pay down a term loan that is expensive and highly restrictive. We are now focused on a second strategic objective of driving profitable revenue growth by focusing our resources on the businesses where we have a leadership position- fashion, active and home.
Peanuts and Strawberry Shortcake are iconic entertainment properties, and we are proud of the contributions Iconix has made to these brands. Specifically with Peanuts, in partnership with the Schulz family, we have produced the first-ever feature film, delivered countless worldwide collaborations and significantly grown the worldwide presence of Peanuts.”
The Company intends to use the net proceeds from this transaction plus additional cash on the balance sheet to pay down approximately $362 million of debt. This includes a mandatory payment of approximately $152 million of the Company’s Senior Secured Notes issued under the Company’s securitization facility, and the full extinguishment of the $210 million outstanding balance of the Company’s Senior Secured Term Loan.
Going forward, the entertainment segment will be reported as a discontinued operation. The Company expects the elimination of earnings from the entertainment segment to be offset by interest savings from the reduction of debt.
Iconix acquired an 80% interest in the Peanuts brand in June of 2010 and added Strawberry Shortcake to the portfolio in March of 2015. The total acquisition cost of these brands was $246 million.
This transaction, which is expected to close by the end of the second quarter of 2017, is subject to certain customary closing conditions.
Guggenheim Securities served as exclusive financial advisor to Iconix and White & Case LLP served as the Company’s legal counsel.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a portfolio of consumer brands including: CANDIE’S (R), BONGO (R), JOE BOXER (R), RAMPAGE (R), MUDD (R), MOSSIMO (R), LONDON FOG (R), OCEAN PACIFIC (R), DANSKIN (R), ROCAWEAR (R), CANNON (R), ROYAL VELVET (R), FIELDCREST (R), CHARISMA (R), STARTER (R), WAVERLY (R), ZOO YORK (R), UMBRO (R), LEE COOPER (R), ECKO UNLTD. (R), MARC ECKO (R), and ARTFUL DODGER. In addition, Iconix owns interests in the MATERIAL GIRL (R), ED HARDY (R), TRUTH OR DARE (R), MODERN AMUSEMENT (R), BUFFALO (R), NICK GRAHAM (R) and PONY (R) brands. The Company licenses its brands to a network of leading retailers and manufacturers that touch every major segment of retail distribution in both the U.S. and worldwide. Through its in-house business development, merchandising, advertising and public relations departments, Iconix manages its brands to drive greater consumer awareness and equity.
Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include projections regarding the Company’s beliefs and expectations about future performance and, in some cases, may be identified by words like “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek” and similar terms or phrases. These statements are based on the Company’s beliefs and assumptions, which in turn are based on information available as of the date of this press release. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement and could harm the Company’s business, prospects, results of operations, liquidity and financial condition and cause its stock price to decline significantly. Many of these factors are beyond the Company’s ability to control or predict. Important factors that could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements include, among others: the ability of the Company to successfully complete the sale of the Sharper Image brand, the ability of the Company’s licensees to maintain their license agreements or to produce and market products bearing the Company’s brand names, the Company’s ability to retain and negotiate favorable licenses, the Company’s ability to meet its outstanding debt obligations and the events and risks referenced in the sections titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent Quarterly Reports on Form 10-Q and in other documents filed or furnished with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements.
Contact Information:
Jaime Sheinheit
Iconix Brand Group
jsheinheit@iconixbrand.com
212.730.0030