J. Crew is preparing to take Madewell public

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J Crew Store NYCHollis Johnson/Business Insider

  • J. Crew Group Inc is preparing to take its Madewell apparel business public.
  • The company hired investment banks to prepare for an initial public offering (IPO) of Madewell to better compete with e-commerce and brick-and-mortar competitors, according to sources familiar with the matter.
  • Madewell makes up nearly 20% of the company’s overall revenue, according to regulatory filings.
  • J. Crew’s debt is roughly $1.7 billion and the company expects Madewell’s stock market value to exceed that, according to sources familiar with the matter.
  • Visit BusinessInsider.com for more stories.

(Reuters) – J. Crew Group Inc has hired investment banks to prepare for an initial public offering of its Madewell apparel business, as the U.S. clothing chain seeks ways to revive its fortunes, three people familiar with the matter said on Thursday. 

The move comes three months after J. Crew said it would explore an IPO of the division. The New York-based company is seeking to shore up its strained finances, amid competition from e-commerce firms such as Amazon, as well as brick-and-mortar retailers.

J. Crew has enlisted Bank of America, Goldman Sachs, JPMorgan Chase, and Morgan Stanley as the lead underwriters for an IPO of Madewell expected sometime after the U.S. Labor Day holiday in September, the sources said.

The retailer has a debt load of roughly $1.7 billion. It expects Madewell, known for its denim clothing, to be valued by the stock market at significantly more than that, the sources added. J. Crew will not sell down its entire holding in Madewell right away, according to one of the sources.

The sources spoke on condition of anonymity because the details of the IPO preparations are confidential. 

Representatives for J. Crew, Bank of America, Goldman Sachs, JPMorgan and Morgan Stanley declined to comment or had no immediate comment.

J. Crew was taken private in 2011 by private equity firms TPG and Leonard Green & Partners LP in a $3 billion leveraged buyout. The private equity firms declined to comment.

In April, J. Crew said it was exploring alternatives for reducing debt and restoring profitability, and named operations chief Michael J. Nicholson interim CEO.

It had enlisted restructuring advisers at Weil, Gotshal & Manges LLP, the law firm that helped negotiate a previous debt workout for the company and steered department store operator Sears Holdings through bankruptcy, Reuters reported in March.

Madewell has experienced rapid growth, and makes up about 20% of the company’s overall revenue, according to regulatory filings. 

A slew of U.S. apparel retailers in recent months have carved out divisions to bring overall business back to life.

In February, Gap announced plans to separate its better-performing Old Navy business into a publicly traded company.

The Madewell IPO would also cap a run of listings among major jeans brands this year, including Levi Strauss & Co. Denim is undergoing a revival following years of athleisure dominating casual wear.

Reporting by Mike Spector and Joshua Franklin in New York; Additional reporting by Harry Brumpton and Melissa Fares; Editing by Rosalba O’Brien

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