Fashion house BCBG mulls IPO, partial sale

(Fortune) -- Women's apparel maker BCBG Max Azria has designs on Wall Street.

The closely held Vernon, Calif.-based company, controlled by founder Max Azria, is considering options that include an initial public offering or a partial sale of the company to a private equity firm, people familiar with his plans said.

To help get its house in order ahead of a potential deal, BCBG - named for the Parisian phrase "bon chic, bon genre," which means "good style, good attitude" - is courting a seasoned financial executive, Fortune has learned.

The company has struck an agreement in principle with Efthimios Sotos, the former chief financial officer of the Jones Apparel Group (Charts, Fortune 500), though a formal employment agreement has yet to be signed, these people said.

Sotos declined to comment. Azria was traveling outside of the country, and could not immediately be reached.

Any stock offering or other deal is still months away, and would depend on the health of the economy and the financial markets. After years of healthy consumer spending, investors have begun to sour on retail and apparel companies over concerns that the housing slump and slower-than-expected job growth will finally put a crimp in shopping habits.

Azria suggested last year that he was considering a stock offering, but has since focused on growing the company through acquisitions and internal development. While an IPO now would give him the diverse capital base he needs to expand further, some analysts caution that such a step may be difficult to pull off given investor jitters.

"Max had a great window to take this company public," said Robert D'Loren, who, as head of UCC Capital, arranged a $53 million bond offering for BCBG in 2004. (BCBG repaid the bonds in 9 months.) "It will be more challenging now with retail stocks falling out of favor, but the company has a very strong growth story."

BCBG has stretched far beyond its initial namesake line of slinky dresses and sportswear sold in department stores like Bloomingdale's and Macy's (Charts, Fortune 500). Today, the company operates 1,077 of its own retail stores in 33 countries (including 161 locations in the U.S.) under names like Max Rave, Herv Leger and BCBGGirls.

BCBG recently launched a line of women's clothing at Carrefour, the French retailer that is second only in size to Wal-Mart (Charts, Fortune 500). Sold under the Tex by Max Azria name, the agreement includes minimum guarantees of 1 billion euros, or $1.4 billion, through 2011.

BCBG has also been on the hunt for acquisitions, snapping up G+G Retail from bankruptcy protection in February 2006, as well as French retailer Alain Manoukian and Don Algodon of Spain. Revenue has more than quadrupled, to $1 billion a year, since 2003. As a private company, BCBG does not disclose financial information.

One reason BCBG has been able to grow so rapidly is its ownership of overseas factories and other procurement facilities, which allows the company to add new brands cheaper and faster than if, like most retailers, it outsourced production.

Plans call for the launch of several new apparel brands this year, as well as the stepped up expansion of retail stores, sources said. "This company has a massive infrastructure, and the best way to use that infrastructure is to find other niches in the market place, both wholesale and retail," one source said.

In seeking out Sotos, BCBG is turning to a financial executive with experience in both acquiring and selling companies. At Jones, a $4.7 billion apparel firm that includes brands such as Nine West and Anne Klein, Sotos was part of the financial team that worked on several acquisitions, including that of the Maxwell Shoe Company and Barneys New York, which was later sold to Istithimar, the Dubai investment firm.

He also presided over Jones' failed attempt to sell itself to a private equity firm last year, a deal that unraveled when bids came in below the board's asking price.

Sotos' fate was unclear after he unexpectedly resigned from Jones in March, a year after being promoted to the CFO post, and amid internal management turmoil. His exit was followed three months later by the departure of Jones CEO Peter Boneparth, who left after falling out with the board over the company's strategic direction.