Russsell Simmons trying to sell Phat Farm to Tommy Hilfiger


Jun 3, 2003
Russsell Simmons trying to sell Phat Farm to Tommy Hilfiger

So most of America's clothing merchants struggle for survival and bemoan their fate, Russell Simmons says he is ready to soar.

Mr. Simmons, a hip-hop impresario with a clothing company named Phat Fashions, has put his brands on $300 million worth of goods a year at wholesale: everything from perforated nylon basketball shirts to zebra-printed bustiers to baby clothes. But Mr. Simmons, who once dealt dope on the streets of Hollis, Queens, is already looking for his next big score.

Two weeks ago, he said he was talking to Tommy Hilfiger about a deal to sell Phat Fashion. By last week, it was Kellwood, another large clothing company. He envisions not only the purchase price — analysts estimated it at $150 million to $200 million — but also a deal that would let him remain in charge and pay him a substantial percentage of the profits in future years. He needs to sell, he said last week, to gain the resources of a larger company and to take his company to the next plateau: blanketing department stores, which currently do not handle a lot of his clothes. On Friday, an investment banker familiar with the situation said talks with Kellwood, a large — and stodgy — manufacturer and marketer, were proceeding. Spokeswomen from Kellwood and Tommy Hilfiger declined to comment.

"I'm talking to all of them; yeah, we're negotiating," Mr. Simmons, the former recording mogul, said last week. "Money's an issue: I have my price.

Right now, Phat Fashions sells only 15 percent of its goods through department stores; the rest are carried by specialty-store chains like Jimmy Jazz, d.e.m.o. and Up Against the Wall. "Ralph has 85 department store , 15 percent specialty," Mr. Simmons said of sales. "That's where I'd like to be."

As Mr. Simmons, 45, tells it, he is sitting pretty, pointing to as many deals as a rapper has rhymes: deals in the works or that have just dropped into place. In 1984, he was a co-founder of Def Jam Recording — "Def" means the ultimate — and sold it off in pieces for an undisclosed total estimated at $130 million. For the last 11 years, he has run Phat Fashions, which creates street fashion for upwardly mobile, outwardly cool young people. Within the last year, sales by the company, which is private, have risen 30 percent, Mr. Simmons said. Licensing deals for shoes, cellphones and Visa cards are just being announced, not only for his Phat Farm men's clothing company but also for Baby Phat, the women's and children's clothing company run by his wife, Kimora Lee Simmons.

"The question everybody asks — and I have to put this carefully — is, with respect to the urban business, is how long will this phase last and what will the next hot brand be?" said Gilbert W. Harrison, the chairman of Financo, an investment banking firm that specializes in retailing.

Mr. Simmons is turning up the volume at Phat Fashions and its sister companies.

Within the last two weeks, Mr. Simmons has announced a deal to sell his Def Con3 soda — "the smart energy soda," which tastes like liquid cotton candy and has vitamins added — to 5,200 7-Eleven stores. He has also expanded a publicity campaign for his six-month-old Rush Card. a "prepaid Visa Card for individuals without access to traditional banking services."

During that time, he also announced the planned reopening, in mid-September, of his remodeled Phat Farm store in the SoHo section of Manhattan. The old d飯r was "too underground, too cool," he said. And he held a news conference to promote the spring debut of his vaguely preppy new department store line called Def Jam University, a collaboration with Kellwood.

"You know, black people know luxury," he continued. "They are the best judges. They know the aspirations of most Americans. They study the best. They know when something is hot; they know when something is dead."

He paused. "But you know, 60 percent of the people who buy our clothes are white."

Ms. Simmons, he continued, is forging ahead with her Baby Phat women's and children's line and embarking on a series of product tie-ins. There will be a Kimora Lee for Baby Phat pink plastic cellphone with "diamonds" on it, he said, and even her own Kimora Lee Simmons for Baby Phat Rush Card. Most products are emblazoned with Ms. Simmons' signature kitten, an abstract creature with a long, curving tail.

"Right now, Baby Phat's only a $35 million company," said Mr. Simmons, as his advisers cringed. (Private companies do not usually divulge numbers.) "But that's where the real growth will come — in a few years, Baby Phat is waiting to explode into a billion-dollar company."

Exhausting, isn't it?

For Mr. Simmons, a vegan who practices advanced yoga every afternoon, it all seems a breeze. Maybe it's the yoga, an hour and a half of heavy-duty bending and acrobatics (including battle lunges and headstands), interspersed with readings that counsel serenity.

Yet he is not serene when he talks about his travails, trying to be a black garmento in a white garmento's world, even though hip-hop fashion — euphemistically known in the industry as urban style — is one of the fastest-selling fashion trends, especially appealing to young people. Phat Farm, along with brands like Ecko, Rocawear and Enyce, is viewed as having integrity.

As Silas Addo, a 24-year-old college student, puts it, Phat Farm "is authentic — the style is dope!"

Other so-called hip-hop or urban brands like FuBu, "used to be hot two years ago," said Mr. Addo, a New Yorker who was riding the subway in a striped jersey and expensive baggy jeans (not Phat Farm). "But Fubu doesn't have good stuff anymore."

WHAT Mr. Simmons strives for, he said, is what those involved in hip-hop culture strive for: class.

"It's been obvious for a long time," he said. "Hip-hop chooses: Bentleys are hot because Puffy and my wife drive them," he said.

In an interview for a television documentary on hip-hop that is scheduled for November, Mr. Simmons refused to be drawn into tough talk, the old duels among rap artists.

"I shy away from battle talk," he said. "Make society better and they'll say something better."

So, to a certain extent, that is what Mr. Simmons is trying to do, with his campaigns against the Rockefeller drug laws and his voter registration drive. But there are complications: he is being investigated by the Temporary State Commission on Lobbying of New York, which contends that he violated the state's lobbying laws by meeting with lawmakers in Albany. To lobby, one has to register as a lobbyist, and Mr. Simmons has not done so. Mr. Simmons and his lawyers have filed suit in a federal court, contending that the commission's action violates his First Amendment rights.

WITH his new prepaid Visa card, which one of his other companies, Rush Communications, is producing, he took a lofty, public-spirited tone about helping the poor. But he conceded that his company takes a fee: $19.95 to enroll. There is also a monthly fee: "Never more than $10," said Craig Marshall, the chief operating officer of Rush Communications, the umbrella company for Mr. Simmons' ventures. (Rush, Mr. Simmons explained to the documentary filmmaker, is an old nickname — nothing to do with drugs.)

The prepaid Visa cards are a joint venture between Rush Communications and Unifund, a buyer of and seller of distressed debt. Most of Phat Fashions' deals are licensing deals to others, who actually make the jackets, the shoes, the soda and the phones. Under such licenses, Mr. Simmons's companies get a percentage of sales.

Analysts and bankers estimate the company's profits at $20 million to $30 million. On Thursday, Mr. Simmons put them at $29 million.

Whatever the amount, analysts say Mr. Simmons would be lucky to get $200 million.

"I may not even get that," Mr. Simmons said on Thursday. "It's the back end I care the most about. It could be a multibillion-dollar company if I get the infrastructure, the sourcing, the expertise. I'm sick of late deliveries."

And there is an added incentive. A clause in Phat Farm's contract with the licensee for men's clothes lets anyone who buys Phat Farm buy out the licensee for $25 million, peoplewho have seen the document say. Right now, they added, the licensee is returning $15 million to Phat Farm — potentially making the buyout a very good deal indeed.

Two days ago, Mr. Simmons said he still did not know who would end up buying his company — and how any such deal would be structured.

"Listen, all I care about is growth," he said. "I just want growth for
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