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NRDC Ups Buying Power With IPO

NRDC Equity Partners, parent of Lord & Taylor, has formed NRDC Acquisition Corp. to raise $360 million for the possible purchase of one or more operating...

Richard Baker right

Richard Baker (right)

Photo By WWD Staff

NRDC Equity Partners, parent of Lord & Taylor, has formed NRDC Acquisition Corp. to raise $360 million for the possible purchase of one or more operating companies.

An initial public offering of 36 million units at $10 per unit began trading on the American Stock Exchange under the symbol NAQ.U on Thursday. Each unit consists of one share of common stock and one warrant to purchase an additional share of common stock at $7.50.

Aside from Lord & Taylor, NRDC recently purchased the Peter Som Inc. designer business and is likely to seek further acquisitions in the fashion and retail industries. The equity player is said to be among the companies that could be interested in Saks Inc., though a Saks deal would require additional funding considering the retailer's revenues are around $3 billion. Baugur Group, an Icelandic investment firm, has taken an 8.1 percent stake in Saks and is a potential suitor as well. NRDC could also pursue a big designer brand.

NRDC Acquisition, in its prospectus, indicates the possibility of seeking additional financing, such as by issuing equity or debt securities, in the event the IPO is insufficient to complete a large deal.

"We're very intrigued with high-quality luxury brands, whether they are retailers or designers who could have their own retail stores, among other things," Richard Baker, chief executive officer of NRDC and chairman of Lord & Taylor, told WWD in an interview last month when the company bought Peter Som.

Asked at the time if he was considering a high-end retail acquisition, Baker replied: "We look at everything. We look at all kinds of different things."

Officials said Thursday that Baker would not comment on NRDC Acquisition due to Securities and Exchange Commission regulations.

NRDC Equity is an investment company pursuing investments in real estate, retail, fashion and manufacturing brands. While homing in on American brands, Baker doesn't exclude going overseas for an acquisition, but he has emphasized that American design talent is where NRDC is most actively searching. The NRDC Acquisition prospectus indicates business targets will not be limited to a particular industry or geographic location, though the initial focus will be on the U.S.

To bolster L&T's exclusive offerings and forge separate wholesale and retail opportunities, NRDC recently took stakes in Cynthia Steffe; recruited Charles Nolan as creative director for L&T's Kate Hill bridge label; tapped Bryan Bradley as creative director for the Bryan by Bryan Bradley contemporary line exclusive at L&T, and enlisted Joseph Abboud to oversee men's private label design and serve as creative director of L&T's men's business.

NRDC Equity is close to disclosing that an executive to manage its growing stable of talent has been hired. Sources said Susan Davidson, former group president at Liz Claiborne who's been on the sidelines since June, is likely to be named head of what NRDC calls Creative Design Studios. "She's got experience in wholesale, retail, opening stores and developing offshoot businesses, like accessories," said one source. At Claiborne, Davidson oversaw nonapparel categories and had oversight of Kate Spade for a few months. Earlier, she held management posts at Dana Buchman and Henri Bendel.

NAQ.U is considered a "blank check company," otherwise known as a SPAC, or special purpose acquisition company. The idea is to sell stock to the public to raise money before the SPAC actually owns or conducts any business. SPACs enable retail investors to invest in areas sought by private equity firms and make it faster for the acquired business to go public. They represent an alternative when other financing options dry up.

Investors put a lot of faith in the management behind the SPAC and their operational and deal-making ability.

According to the rules of the SPAC, management has two years to make an acquisition, which must be approved by the majority of shareholders. If no deal is made within the allotted time, the SPAC must return the money, with interest to the investors, but investors could get less due to the costs of orchestrating the IPO. NRDC estimates a public stockholder would receive about $9.88 a share in the event the SPAC liquidates. The prospectus raises the possibility it may not be able to consummate a deal "because of our limited resources and the significant competition from business combination opportunities...including venture capital funds, leveraged buyout funds, operating businesses and other entities and individuals, both foreign and domestic."

The competitive field would also include the recently formed TSM Capital, founded by industry veteran Marvin Traub along with Mortimer Singer and Aslaug Magnusdottir, and The Atelier Fund, which was launched this year by Marty Wikstrom and Dawn Mello. But on a bigger scale, there is also Fast Retailing Co. Ltd., owner of Theory, Helmut Lang and Uniqlo, which recently said it has set aside $3.5 billion for overseas acquisitions, and Li & Fung USA, which bought some of the moderate brands being sold by Liz Claiborne Inc. and last month acquired Regatta Pacific Alliance, which will be used as a base for acquisitions. Baugur would be another big competitor to NRDC Acquisition.

According to the NRDC Acquisition prospectus, as of Aug. 31, "approximately 115 similarly structured blank check companies have completed IPOs in the U.S. since the start of 2004 and 45 others have filed registration statements. Of the blank check companies that have completed IPOs, 30 have consummated deals and 24 others have announced that they entered definitive agreements or letters of intent to do a deal.