One of the premium denim pioneers, True Religion Apparel Inc., says there might be a true believer out there who would buy it for a premium price.

The Vernon-based jeans maker announced last week that its board had formed a special committee to explore strategic options, including a sale of the company. The move came in response to inquiries from potential buyers.

Analysts estimate True Religion could sell for about $650 million to $930 million.

Shares of the company quickly spiked Oct. 10 to close at $25.71, a gain of 24 percent for the week. The company was the second biggest gainer on the LABJ Stock Index. (See page 30.)

Founded in 2002, True Religion became a trend setter in distressed and frayed denim jeans. The company originally made and sold jeans in department stores that sold for around $200. In 2005, it expanded by opening brand-name stores; the company now has 116 stores in the United States and 23 in foreign countries.

Ilse Metchek, president of the California Fashion Association in downtown Los Angeles, said the company stands out from the crowd of jeans makers, including local players such as Citizens of Humanity in Huntington Park, Joe’s Jeans in Commerce and Paige Premium LLC in Los Angeles, thanks to its stores. Its brand recognition and stores might make the company an attractive takeover target.

“It’s very rare for a manufacturing brand to become a major retailer,” Metchek said. “At this point, their worth is based on real estate and the brand. They have done a fabulous job building a brand and today it’s all about brand rather than product.”

Paul Zaffaroni, an investment banker who specializes in apparel at Roth Capital Partners in Newport Beach, said possible strategic buyers for True Religion include fashion houses such as Warnaco in New York or conglomerate PPR in Paris. Alternately, a private-equity firm with experience in apparel could buy the company.

For any buyer, the challenge is to improve operational efficiency and grow the company by moving beyond denim into other types of clothing, following the model set by Guess Inc., another L.A. company that started in jeans but now sells a range of apparel and accessories.

“The opportunity is to further their development from a denim brand to a lifestyle brand, which will include international expansion,” Zaffaroni said. “A lot of these premium denim companies have shown good growth and have been attractive investments. As they evolve, the goal is to extend their brand into other categories of apparel.”


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