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Liz Claiborne just shrunk by a few sizes — again.
The cash-strapped clothing conglomerate, whose CEO Bill McComb, began his rocky tenure in 2007 by putting up for sale more than a dozen of the company’s department-store labels, has sold its money-losing Mexx brand.
The Gores Group — headed by Los Angeles billionaire Alec Gores, a buyout mogul who lately has circled targets including Warner Music, Miramax and Borders — will pay $85 million in cash in exchange for an 81.25 percent stake in Mexx.
McComb said in a statement that Liz now “will be able to fully turn our attention to building and growing our core portfolio of global lifestyle brands,” which include Juicy Couture, Lucky Brand and Kate Spade.
Nevertheless, insiders said the sale of Mexx makes Liz a more attractive buyout target for private-equity firms that have been sizing up the company.
“Liz didn’t get a lot” for Mexx, according to one banking source, noting that Liz acquired Mexx a decade ago for $264 million.
Still, an insider said the deal was an improvement on a private-equity offer for Mexx that Liz had weighed earlier this year.
In that scenario, Liz “basically would have paid to get rid of it,” according to the source.
The troubled apparel chain, whose stores in Europe and Canada reaped $730 million in revenue last year, are nevertheless losing about $25 million a year in Ebitda, or earnings before interest, taxes, depreciation and amortization.
In addition to eliminating that burden, Liz will use proceeds to pay down its debt load, which totals more than $500 million.
Mexx will continue as a joint venture controlled by Gores, who said he will keep CEO Thomas Grote in his current position. Liz will maintain a minority stake.
“In uncertain times and true market volatility, de-risking became essential,” McComb said in a statement. Gores said he sees “an excellent opportunity to create value and rebuild a great brand.” Liz shares rose 46 cents, or 9.1 percent, to $5.52.