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Authentic Brands Group CEO talks $2.5 billion Reebok deal, the decision to stay private, Shaq

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Authentic Brands Group Founder & CEO Jamie Salter joins Yahoo Finance to discuss buying Reebok, the decision to delay the company's IPO, and the outlook for the company going into the holiday season and 2022.

Video transcript

[MUSIC PLAYING]

BRIAN SOZZI: All right, welcome back to Yahoo Finance's special presentation of the future of retail. I'm Brian Sozzi, still stationed smack in the middle of all the retail action in New York City, Greeley Square Park. The crowds are back, you could see some tourists in here. Again, this was a very different situation last year, very much an empty area in here, but the stores are back, people are back and they're shopping, and a very interesting week for our next guest here.

Let's bring in Authentic Brands CEO Jamie Salter. Jamie, good to see you. We were just talking in break, I'm actually standing in front of your Aeropostale stores here in New York City. It is very crowded in there. The styles look pretty cool. I'm certainly, I'm sure that's very good to hear from you, but take us to this deal you and Authentic Brands made this week.

JAMIE SALTER: Well, it's an interesting deal. We were scheduled to do our IPO in July and we did file our S-1, and then we were looking at Reebok. Reebok heated up towards the end of July and we had to make a decision, sort of do an IPO or do the Reebok deal. So we chose to do the Reebok deal. And it's been sort of gangbusters since we closed that deal in August. And so we signed the deal in August and we'll be closing in middle of February to the end of February.

But we had a lot of interesting parties. And one of the parties that was bidding against us, CVC, actually called us up and asked us if we were interested in partnering with them on the Reebok transaction, and we said no, but we would be interested in possibly bringing you in and not going public. So CVC and HPS came into ABG. They bought approximately 25% of the company. And we're going to stay private now for the next few years.

BRIAN SOZZI: Jamie, that sounds like a big chunk of change you just raised. How much did you, in fact, what was the cash infusion as part of the transaction and how do you plan to spend that money?

JAMIE SALTER: Well, look, really the truth of the matter, there wasn't a cash infusion in the company. The cash went to the existing stakeholders and shareholders of AVG. AVG has plenty of cash on their balance sheet and available through their debt facility.

BRIAN SOZZI: Let's focus in on Reebok. That deal is expected to close, if I'm correct, sometime in the first quarter of next year. It's a brand that I know, that I have loved, I have purchased many items there through the years, but it went unloved inside that Adidas portfolio. How do you plan to revive Reebok?

JAMIE SALTER: Well, look, I don't know that it went unloved. What you, you know, when you look really deep into Reebok, Adidas was doing exactly what it should be doing, which is growing the Adidas brand. And that's what Adidas really focused on. And when you have a sales force that is out there selling Adidas shoes and then the last 20 minutes they start to sell Reebok shoes, Reebok gets a lot less of the wallet from the retailers. So now that Reebok will be on its own, Reebok will have a much bigger opportunity to take more of the wallet from the retailers.

And more importantly, what we're really seeing, is that as Nike continues to pull out of certain retailers around the world and go more on a direct basis, it's opening up a very big opportunity for Reebok. So look, we'll think about Reebok on a Monday morning at 7 o'clock and you know, maybe Adidas was thinking about Reebok on a Wednesday versus Monday morning at 7 o'clock in the morning. So we're very laser focused on building Reebok back to what it once was a decade ago. And we're already seeing a 25% lift in Reebok revenue since they announced the partnership with ABG.

BRIAN SOZZI: I think Reebok, Jamie, I think Shaq. Now Shaq is a brand you have inside of this portfolio at ABG. How do you plan to leverage Shaq? I think Reebok has an amazing catalog, an amazing history. How do you plan to just move that forward?

JAMIE SALTER: Well, look, whether it's Iverson or whether Shaquille O'Neal, bringing back the pump and getting back into the Basketball business in a major way is one of the focuses that we will plan on doing with shops like Foot Locker and JD Sports and Finish Line. So we do plan on really bringing back a lot of the archives and classics in a much bigger way than they have been in the past. And I think that that is some of the real important things about Reebok is really digging into the archive files and bringing some of those classic silhouettes back.

BRIAN SOZZI: I mentioned at the top, Jamie, I walked into the Aeropostale store, which is part of your portfolio of brands. Crowded, I mean, the styles look great. People actually, I mean, they were in there buying and leaving with a good number of bags. I mean, what's your outlook for the holiday season?

JAMIE SALTER: Look, we're incredibly optimistic. I mean, inventory levels are definitely at an all time low, but what we're seeing, is consumers are coming in, they're buying. They're not looking for big discounts and they are looking to sort of buy early. So we're incredibly optimistic about Aeropostale and obviously, lots of our other brands. But what we're also seeing, is they're buying not only in store, they're also buying online. So you're seeing this omnichannel effect really start to kick in like we've never seen before, where they're shopping in both venues. We haven't seen the malls this busy really in three years. So the malls are cranking and we're quite optimistic of the outcome for this year.

BRIAN SOZZI: You know, last thing before I let you go, Jamie, you've built one very interesting company here. Many brands that we all know and have shopped through the years. Forever 21, Brooks Brothers, Aeropostale, Eddie Bauer, you name it. What's your ultimate vision for the company?

JAMIE SALTER: Look, our ultimate vision is to build great brands and really consolidate under one pillar. And if you really look at ABG today, we have 30 plus brands in the portfolio. And the portfolio is very robust around the world. Today we sell in over 150 countries. We have over 7,000 sort of partner franchise stores around the world. And the model is fairly simple, which is consolidate and work on sort of one platform.

So when you look at sort of the US, we're consolidated under Spark, which stands for Simon Properties Authentic Retail Concept. And that's sort of our retail play, as well as e-commerce. And then we also have ABG, which is obviously the company that I run today where we have roughly 1,200 partners around the world generating approximately $20 billion in annual retail sales per year.

BRIAN SOZZI: Well, it's been fun to watch you build this company. Looking forward to following your journey from here. Jamie Salter, Authentic Brands founder and CEO, good to see you. Happy Thanksgiving and we'll talk to. you soon.

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