Kontoor Brands announced on Thursday that it has entered into an agreement to sell Lee. The deal consists of an initial payment of $750 million, with the possibility of an additional earn-out of $250 million based on the brand's future performance.
The price tag was higher than expected. According to comments from analysts, expectations for gross proceeds were around $600 to $625 million.
Streamlining the Portfolio
The sale is a result of a review and consumer study conducted by Kontoor. Lee has experienced uneven demand in recent years, particularly in the US market, and has performed worse than its sister brand Wrangler. According to industry analysts, Lee has required continuous investment to maintain its position, which has tied up capital.
Through the divestment, Kontoor intends to direct resources towards its remaining brands, Wrangler and Helly Hansen. The proceeds from the sale are expected to be used for share repurchases as well as debt repayment.
The transaction of Lee is a deliberate step to streamline our brand portfolio and unlock investment capacity, says Scott Baxter, CEO of Kontoor Brands.
By increasing our focus on Wrangler and Helly Hansen, we are better positioned to create a higher growth profile and value for our shareholders.
Digital Focus And New Licensing Model
The buyer, Authentic Brands Group, manages a portfolio of over 50 brands, including Reebok and Guess. The company defines itself as a "digital-first, asset-light" platform, meaning a strategy focused on digital presence and low capital commitment.
In connection with the takeover, Authentic plans to transform Lee's business into a licensing model. This means that they will license out the rights for manufacturing and sales to external partners, while Authentic focuses on brand building, digital distribution and marketing.
What makes Lee interesting is its heritage, says Jamie Salter, founder of Authentic.
At Authentic, we focus on preserving what consumers appreciate about brands, while adding the right partners, distribution and marketing strategies. Lee is exactly the type of brand we are built for.
Lee generates approximately $1.5 billion in annual retail sales across 73 countries. The acquisition is a step in Authentic's long-term goal of reaching $100 billion in annual retail sales for its entire portfolio. The company’s founder also announced this week that he expects Authentic Brands Group to go public within the next twelve months.
The deal is expected to close in the second half of 2026, subject to approval from relevant competition authorities.