Marc Ecko, commented, "I am excited for the opportunity to partner with Iconix and have them join Seth and me on continuing this amazing journey. Ever since I have started, people have tried to marginalize streetwear as a niche business. After 15 years of consistent global retail growth and product expansion, I am excited at taking this next step. This partnership is a great fit for us. Iconix gets our passion for our brand and will support us to realize our vision for the future. This new venture provides me the bandwidth for my brand and allows me the resources and freedom to extend my professional and creative ambitions beyond my current platform of fashion, video gaming and publishing. "
For this acquisition, Iconix will pay $63.5 million of its cash, and the joint venture, of which Iconix will own 51%, will obtain $90 million of financing at an annual interest rate of approximately 7.5%, which is non-recourse to Iconix. Therefore, Iconix's effective purchase price for this acquisition will be $109 million. On a pro-forma basis for 2010, the Company expects the joint venture to generate approximately $42 - $44 million in annual net royalty revenue. Based on a pre-defined revenue and profit sharing calculation in the agreement the Iconix share of the gross royalties from the joint venture will be approximately $26 million. Iconix will control the licensing business and will therefore consolidate 100% of the results of this joint venture with minority interest being deducted below the operating income line, and only the earnings attributable to Iconix will be included in EBITDA.
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