Advent International and Highland Capital, both based in Boston, have together acquired a 48 percent stake in the yoga-oriented, women’s athletic-wear retailer lululemon athletica, based in Vancouver.
The firms agreed to pay $93 million (€79 million) for the majority holding, giving the company an enterprise value of roughly $195 million. Advent is taking the larger position, contributing 80 percent of the capital for the investment.
Advent’s track record in retail makes the firm a natural candidate to help lead the company’s expansion plans. The group’s past retail investments include deals such as UK discount store Poundland, duty-free outlet Dufry Group and music and book retailer HMV Group, among others.
The firm sourced the lululemon transaction roughly two years ago, through a cold call to company management. That, and its background in retail, put Advent on the short-list to take part in the investment.
For Highland Capital, a diversified venture firm, the investment seems curious considering the group traditionally confines its targets to within the information technology, communications or healthcare sectors. The company’s retail experience, until now, has been limited to online plays such as investments in eToys, Staples.com and SmartBargains.
However, according to Steven Collins, a principal at Advent, Highland’s retail link comes from a hiring the firm made this past February, when it brought former CEO and founder of Staples Thomas Stemberg in as venture partner.
Stemberg will sit on lululemon’s board of directors, joined on the board by Collins and David Mussafer, a managing director at Advent.
The investment follows past reports in The Globe and Mail that competitors such as Nike or Roots Canada could be interested in buying lululemon, and Gap Inc. was also said to have expressed interest.
The sports apparel market for females has been valued at $15 billion, according to a press release issued by Advent, with growth in the segment being clocked in the double digits. It is this expanding market place that appealed to the firm.
“The broader introduction of lululemon’s technology-advanced products to the underserved women’s athletic segment presents a tremendous opportunity for the brand not only in the North America but globally,” Advent’s Mussafer said.
The Vancouver-based lululemon currently operates 33 stores, primarily in Canada, although it does have locations in the US, Australia and Japan. With the investment, the company will expand its store count, with expansion planned worldwide. The company’s founder Chip Wilson has made past estimates that lululemon could grow to as many as 200 stores globally, and Advent indicated that it intends to open 15 new US locations per year, over the next five years.
Capital West Partners advised lululemon on the deal, and Pepper Hamilton served as legal counsel to Advent.