Liquidator Gordon Brothers Group won the auction on Thursday for the intellectual property of the Wet Seal LLC with a bid of $3 million, besting the $1.5 million initial offer from Canadian retailer YM Inc, people familiar with the matter said.
Founded as a "bikini shack" in Newport Beach, California, in 1962, Wet Seal filed for bankruptcy last month with a plan to close its approximately 142 stores located primarily in U.S. malls. Hilco Streambank was hired to sell the teen retailer's intellectual property and brand. [nL4N1FN3DB]
Other U.S. specialty apparel chains, including the Limited, American Apparel and Aeropostale, have also filed for bankruptcy in recent months, as the retail sector undergoes a major upheaval due to changing tastes and the advent of internet shopping.
A U.S. bankruptcy court judge must still approve the sale, the four sources said, asking not to be identified ahead of a public announcement. Gordon Brothers and Versa Capital Management, the private equity owner of Wet Seal, declined to comment. YM did not immediately respond to a request for comment.
Wet Seal filed for bankruptcy for the first time in 2015 as it fell victim to the fast fashion-craze attracting the attention of its young, female customer base. Versa bought Wet Seal out of that bankruptcy, but failed to find financing for the business to continue as a going concern.
Wet Seal filed its second Chapter 11 in February with liabilities between $50 million and $100 million.
Gordon Brothers, primarily known as a liquidation firm, also revives dormant brands it often acquires out of bankruptcy through its brand investing arm.
The firm was part of a joint venture that bought electronics brand the Sharper Image out of bankruptcy, which it later sold to brand licensor Iconix Brand Group Inc (ICON.O) for $65.6 million.
Gordon Brothers' other brands have included home goods line Linens 'N Things and furniture label Bombay & Co. Gordon Brothers also currently owns camera brand Polaroid.
Gordon Brothers had already been working on store closing sales for Wet Seal with the help of liquidator Hilco Merchant Resources LLC, according to bankruptcy court documents.
YM, which owns Canadian chains Stitches, Sirens and Suzy Shier, made a stalking horse offer for Wet Seal earlier this week.
An affiliate of YM bought the parent company of women's chains Mandee and Annie Sez out of bankruptcy about four years ago.
(Reporting by Jessica DiNapoli in Las Vegas; Editing by Leslie Adler and Lisa Shumaker)