Private Equity News & Analysis

Forstmann Little gets into fashion

Despite being in wind-down mode, New York-based Forstmann Little is now backing fashion tradeshow company ENK International, following the buyout firm’s investments in a talent agency and a health club chain.

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In its latest investment, New York-based LBO firm Forstmann Little & Company is backing tradeshow organisation ENK International, despite being in wind-down mode. The transaction is currently awaiting regulatory approval and is expected to wrap up in May. Financial terms of the deal were not disclosed.

According to a joint press release, ENK chief executive Elyse Kroll will remain at the helm of the company as a major shareholder and CEO. Kroll founded the fashion tradeshow company in 1981.

The capital being provided by Forstmann Little will be used to facilitate the expansion of ENK’s business, both organically and through acquisitions. The company conducted 22 events in 2005, including shows held in New York City, Los Angeles, and Las Vegas. These events provide a forum for an aggregate of over 9,000 apparel and footwear designers to reach fashion retailers.

Forstmann Little’s investment in ENK is seen as synergistic with the LBO shop’s earlier $700 million (€558 million) investment in talent agency IMG, which produces the New York-based Olympus Fashion Week, as well as other fashion events around the world.

Some had speculated that Forstmann Little’s $1.6 billion acquisition of health club chain 24 Hour Fitness in May 2005 would be the LBO shop’s last investment. Following a number of success stories like Dr. Pepper and Ziff-Davis Publishing, Forstmann fell on hard times after investing in McLeod USA and XO Communications during the telecom craze, which resulted in losses of over $1.5 billion for the firm.

With the 24 Hour Fitness buyout, Forstmann Little had roughly $400 million remaining in LP commitments. Theodore Forstmann, who co-founded and now heads the buyout firm, had told The New York Times in 2004 that he planned to shut down the firm as early as this year and would possibly release LPs of their remaining capital commitments before then. At the time of Forstmann’s NYT interview, his firm had recently shelled out $15 million to settle a lawsuit with the state pension of Connecticut over charges that Forstmann Little had breached its partnership agreement by investing in McLeod and XO.