January 2, 2013 4:00 pm EST - Tory Burch LLC (PrivCo Private Company Ticker: TORYP) disclosed that two investors, General Atlantic and BDT Capital Partners, will acquire approximately 20% of the company through stakes held by Tory Burch's former husband, J. Christopher Burch, according to PrivCo sources. J. Christopher Burch's investment vehicle, JCB Investments LLC, sold a 20% stake in the company - out of his total 28.3% stake - in Tory Burch LLC for approximately $650 million, valuing the company at $3.25 billion. (The deal values Tory Burch's 28.3% stake at $919 million, which, coupled with dividends received from the very profitable privately held company, officially makes her a self-made billionaire.)
Ex-Husband Retains Partial Stake, Leaves Board
Chris Burch will personally retain 8.3% of Tory Burch LLC, making his remaining stake worth $270 million. As part of this private transaction, Chris Burch agreed to give up his Board seat. General Atlantic and BDT Capital received a Board seat in Tory Burch LLC as part of their 20% stake purchase.
Began As Wife's Hobby
Tory Burch LLC was launched in 2004 when Chris Burch provided approximately $1 million in seed funding to help his then wife, Tory Burch, launch Tory Burch LLC, according to PrivCo data. As the business started to grow in 2005, Chris Burch further financed the company with a $2.8 million loan, which was subsequently repaid in 2006, when Tory Burch LLC raised an $8.8 million round of funding from dozens of the couple's friends, with $5 million in equity from the round going into the company. After Tory and Chris Burch's split in 2006, Mr. Burch went on to found fashion label C. Wonder LLC, a strikingly similar concept including near-copycat designs to Tory Burch LLC's, and an obvious pain point in the divorce proceedings, lawsuits and claims by Tory Burch against her ex-husband of trademark infringement.
Settlement Rushed to Beat Tax Hikes
The timing of the deal - and push for a rapid resolution by end of the year, after years of wrangling between the parties - was likely motivated by the impending capital gains tax increase effective January 1 of this year, from 15% to 20% as a result of the fiscal cliff tax bargain. The timing of this deal saved Chris Burch and affiliated investors at least $40.6 million in federal and state taxes on the deal, according to PrivCo calculations. Pre-tax returns for the transaction, as well as Chris Burch's other separate investment holdings and dividends paid out from Tory Burch LLC, officially makes Mr. Burch a billionaire.
As stated, the transaction also officially makes the 46-year old Tory Burch a self-made woman billionaire. PrivCo data shows Ms. Burch to be one of the world's youngest self-made woman billionaires (only self-made billionairess Sara Blakely, founder of privately-held shape-wear maker Spanx, is younger).
PrivCo CEO and Founder Sam Hamadeh stated, "It's unclear why Chris Burch would retain any stake in Tory Burch LLC given the acrimonious business relationship between Tory Burch and her ex-husband, except that Mr. Burch may have wanted to retain some upside in the company, including: ongoing access to the financials for competitive intelligence purposes as a stockholder in Tory Burch LLC to assist the clone company he founded to compete with Tory Burch. But given that Chris Burch agreed to give up his Board seat as part of this stake sale, I'd say Tory Burch has mostly gotten rid of her ex-husband's continued involvement with her company."
Investors receiving the offering memorandum for Mr. Burch's stake Tory Burch LLC were pitched on a growth story that included untapped potential for overseas expansion of the still largely domestic brand. "Tory Burch represents the kind of upper class WASPY preppy image that has already proven to be well received in emerging markets such as Asia. Tory as a brand could grow to become the female Ralph Lauren, and IPO successfully," Hamadeh added.
(Note to readers: Christopher Burch was an early investor in Vault.com, which was also founded by PrivCo's Founder Sam Hamadeh)
- Revenue:$760M (2012), $490M (2011), $313M (2010)
- 1 Year Revenue Growth: 55.1%(2011-2012)
- 3 Year Revenue Growth (CAGR): 50.5%(2009-2012)
- Total Employees: 1,800 (2012)