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On Aug. 21, Athlete's Foot Brands became the latest global franchise to be gobbled up by financiers. But it wasn't a private-equity firm or hedge fund that bought the sneaker retailer for $52 million -- it was a small publicly traded company called NexCen Brands Inc., run by ambitious former investment banker Robert W. D'Loren. His goal: to cobble together an empire of widely recognized consumer companies based on the strength of their licensing. "I envision us to be the world's premier brand owner and manager," he says.
Others seem to share his vision. D'Loren merged his investment banking boutique, UCC Capital Corp., into financial company Aether Holdings Inc. and announced his brand-baron aspirations on June 7. Since then, major hedge funds such as D.E. Shaw, Ramius Capital Group, Soros Fund Management, Pequot Capital Management, and Citadel Investment Group have poured into the stock, sending it up 48%. (With the Athlete's Foot deal, Aether changed its name to NexCen.)
Athlete's Foot was first on D'Loren's agenda because of its reach, which spans 40 countries. D'Loren plans to transform the chain into a splashy sports-lifestyle hub by developing consumer brand products to sell through the franchise -- much like Starbucks Corp. (SBUX
) now sells everything from coffee to DVDs. But D'Loren isn't stopping there. From his office atop a skyscraper in midtown Manhattan, inside the former executive suites of onetime sprawling conglomerate ITT Corp., he recently ran through a three-page-long list of targets.
The plan is risky. D'Loren will try to parlay $130 million in cash on NexCen's balance sheet into a $700 million-or-so shopping spree, tapping the company's equity and taking on more debt to write the checks. But if his plans for fixing up companies don't gel quickly, all bets are off.
Still, D'Loren, the son of a stone mason from Long Island, has built his career on bold ideas. Back in 1999, while he was running UCC Capital, he dreamed up a new way for fashion designers like Bill Blass to raise money. Traditionally, they got financing based on their inventories; D'Loren told them they could raise money by bundling up their annual trademark revenues and selling them to investors. Other apparel designers and retailers quickly lined up. His approach was considered so unique that "I once described [D'Loren] to someone as the Michael Milken of trademark financing," says Oscar de la Renta Ltd. CEO Alexander L. Bolen, referring to how Milken pioneered the junk-bond market for struggling companies in the 1980s.
D'Loren's latest notion is that garment makers should outsource their manufacturing and become pure licensing businesses. He recently advised Neil Cole, the younger brother of shoe designer Kenneth D. Cole, on a string of acquisitions that transformed Cole's trendy teen-shoe maker Candie's Inc. into a diversified apparel-license outfit called Iconix Brand Group Inc. (ICON
). He also advised on Iconix' purchases of jeans maker Mudd (USA) this year and dress designer Badgley Mischka in 2004. Since the Mischka deal, Iconix' stock price has zoomed 230%.
D'Loren has also attempted to raise money for music composers by securitizing their copyright revenues -- with mixed results. He assisted a Nashville-based performing-rights organization in 1999 in raising $29 million. But he was sued by songwriter Annie Roboff after an attempt to raise financing for a songwriters' collective fell apart in 2004. According to her complaint, Roboff claimed she was fraudulently induced to transfer title to a number of her songs to the group, which then failed to manage them properly. The case has not yet been settled. "It was unfortunate, and I hope it will be resolved," says D'Loren.
Meantime, D'Loren is thinking about applying his approach to other industries, such as restaurant chains. "If you think about it," he says, "the intellectual property of restaurant franchises shouldn't be that different." By Emily Thornton