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SNEWS® has learned from inside sources that Sun Capital, which acquired Kellwood on February 11, 2008, has initiated a restructuring that will divide the company into four separate entities, all owned by Sun Capital. American Recreation Products (Sierra Designs, Ultimate Direction, Royal Robbins, Kelty, Slumberjack, and Wenzel), Hanna Andersson, Gerber and Kellwood will be the four divisions we have been told, each operating as a separate Sun Capital portfolio.
Already, ARP company executives are reporting directly to Sun Capital and not to Kellwood SNEWS® insiders told us. George Grabner remains the head of ARP it was confirmed.
SNEWS® View: This news does not come as a complete surprise. Sun Capital is a private equity company, which certainly desires a relatively good return on its investment. We do know from interviews made during the Sierra Designs move to Boulder several years ago that Kellwood had absorbed various administrative and operating functions for each of its ARP entities, and then billed each one for those services. While not an unusual practice, it does muddy the waters a bit when trying to see, as Sun Capital certainly is now, which of its brands are profitable, and which might need a bit of, well, retooling, consolidating or even downsizing.
The good news here is that Grabner has likely been given more control over the destiny of ARP and the brands within its fold. The wild card in all of this, however, is that our economy isn’t exactly doing so well. And unless Sun Capital is going to break the mold of private equity firm behavior, we would suspect that it is already directing ARP brand presidents to do what they have to do to make their numbers – numbers mandated by dollar crunchers who have no sentiment and see only black and white and ROI. What all that means is anyone’s guess, but it would not surprise us to see cutbacks in promotional and advertising dollars, trimming in R&D departments, reduction of SKUs to exit product lines that are not selling well and, maybe, though we hope not, layoffs of some personnel.