Deals

Firms buy Linens 'n Things brand for $1m

The intellectual property of Linens 'n Things, the former Apollo Global portfolio company, has been acquired by private equity firm Hilco Consumer Capital and investment firm Gordon Brothers Group for vastly less than the original $1.3bn buyout value.

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Hilco Consumer Capital, a private equity firm, and Gordon Brothers Group, an investment firm with a private equity arm, are in the process of acquiring the brand name and logos of Apollo Global Management-backed Linens ‘n Things for more than $1 million.

The transaction is expected to close this week in bankruptcy court, according to Paul Cohen, vice president of Hilco. The transaction includes $1 million in cash and has a “going forward” enterprise value of $5 million.

Leon Black's Apollo led an investor consortium that acquired Linens ‘n Things, once the second largest houseware retailer in the US, for $1.3 billion in 2006. Apollo had a $260 million equity stake in the company. Linens spiraled into bankruptcy in May last year under a mountain of debt that it could not sustain because of declining sales.

Apollo founder Black said in an investor letter in May that Linens’ bankruptcy would have only a minimal impact on the returns for investors in the firm’s fifth buyout fund.

Linens attempted to sell itself as part of a bankruptcy reorganisation, in which it would emerge from Chapter 11 as a going concern, but failed to attract any buyers. The company liquidated in October. A liquidation group that included Hilco and Gordon ran closing sales at the company’s stores.

Hilco and Gordon plan to keep the Linens brand alive in products sold in other outlets, such as department stores and online. Eventually, the firms hope to once again establish “brick and mortar Linens stores”, Cohen said.

“I think it’s got a tremendous amount of consumer awareness,” Cohen said about Linens. “It was second only to Bed Bath & Beyond.”

Hilco, based in Chicago, was founded in 2006 and is a subsidiary of The Hilco Organization, a business asset acquisition and specialised corporate finance company. Hilco has made $150 million to $200 million worth of retail acquisitions in the past few years, including the purchase of bankrupt The Sharper Image in May. Cohen declined to talk about Hilco’s investment funds.

Gordon Brothers is an investment firms that works in various asset classes, including real estate and private equity. The firm’s private equity arm, called GB Merchant Partners, invests from its $320 million 1903 Equity Fund, which closed in 2007.