Blue Holdings to Pay $32 Million for Up Against the Wall

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NEW YORK – Paul Guez’s Blue Holdings Inc. said Tuesday it would pay $32 million – half in stock and half in cash – for Long Rap Inc., the operators of the 24-unit Up Against the Wall stores.

In a deal expected to close by September, and to be accretive to BH’s earnings in the second half of 2007, the three principals of Long Rap – Izzy Ezrailson, Chuck Rendelman and Mitch Kupchak – would split cash and, at Tuesday’s closing price on the Nasdaq market, about 3.2 million shares of BH stock. Long Rap is expected to pick up a seat on BH’s board of directors as well, Paul Guez, chairman, president, chief executive officer and majority owner of BH, told MRketplace.com Tuesday.

Ezrailson and Rendelman are expected to continue to run UATW and, additionally, to supervise all retail ventures for BH, which currently operates one retail store for its Antik Denim brand. Antik is one of UATW’s biggest suppliers.

“Anything that makes sense and that has anything do with retail will be under Izzy and Chuck,” Guez said, “not that I won’t speak up.”

Guez added that the duo will operate autonomously, but that BH’s wholesale brands will work closely with them to make sure BH’s offerings mesh with UATW’s needs. Guez has long said that he wants his brands to operate their own retail stores, citing the lack of control that many manufacturers have over their products and presentation once they’re placed in large retail stores.

The announcement, made just before Guez rang the bell at the opening of the Nasdaq Tuesday morning, confirms reports that appeared on MRketplace.com Monday.

“This strategic acquisition of Long Rap Inc. brings our retail vision into reality and saves us both the time and money to build everything from scratch,” Guez said in a statement. “The merger also brings to us an experienced team of professionals who will be able to run the retail operations efficiently and profitably. The combination of Up Against the Wall’s retail stores and Blue Holdings’ strong brands and beautiful products will create a very powerful and profitable enterprise.”

Rendelman, who is CEO of Long Rap, commented, “With the resources of Blue Holdings Inc. and the three Blue Holdings brands behind us, my team and I will be able to execute the vision of growth that we have had for years. I feel very excited about the future of this merger with Blue Holdings Inc. and look forward to building up a profitable organization for the shareholders.”

In addition to Antik, BH markets the Taverniti So, Yanuk and U brands. Its sales over the past year exceed $40 million, versus about $35 million for Long Rap.

As reported Monday, Ezrailson recently told MR Magazine that he believes the UATW group could easily be expanded to well beyond 100 units, provided adequate financing could be arranged.

“No store is better positioned to be in a multi-location platform than UATW,” Ezrailson, who will receive one of three Lifetime Achievement Awards from MR Magazine next month, said during the interview.

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