As the companies move forward with their partnership, Beyond announced the closing of a $5.2 million expansion of its existing credit facility with Kirkland’s, one designed to strengthen Kirkland’s financial position, provide flexibility for general working capital purposes and support an updated store conversion strategy.
In addition, the companies stated that they have entered into an agreement that results in Beyond acquiring the rights to the Kirkland’s brand. In so doing, Beyond has expanded its brand portfolio, which already includes Bed Bath & Beyond, Overstock and Buy Buy Baby.
As he announced the new arrangement with Kirkland’s, Marcus Lemonis, Beyond executive chairman and principal executive officer, said, “Our expanded investment in Kirkland’s represents another step in our vision to create a family of trusted, iconic brands that serve customers where they are, both online and in local communities. We are excited to bring a much-desired omni experience to our valuable customers. We have broadened the brick-and-mortar store conversion strategy to include the Bed Bath & Beyond Home concept and Buy Buy Baby. We also see great value in enhancing our intellectual property portfolio to include Kirkland’s Home within our family of brands alongside Bed Bath & Beyond, Overstock, and Buy Buy Baby, among others. We expect this to enhance Beyond’s brand equity and unlock new revenue streams across retail formats.”
In connection with the credit facility expansion, Beyond noted that the company and Kirkland’s had agreed to certain amendments and modifications to previous partnership provisions, including:
- Credit Facility Expansion. An amended and restated term loan credit agreement, whereby Beyond provides Kirkland’s with additional financing in an aggregate principal amount of $5 million plus accrued interest under a prior facility and pending collaboration fees. Under the amended agreement, Beyond can convert the outstanding debt into shares of Kirkland’s common stock, subject to NASDAQ shareholder approval rules, if applicable. Beyond and lender Bank of America have provided waivers to Kirkland’s in the event of default for non-compliance with certain covenants.
- Brand Portfolio Expansion. The parties have entered into an asset purchase agreement pursuant to which, subject to senior lender approvals, Beyond will acquire all Kirkland’s trademarks that contain the term Kirkland, along with certain related assets. Beyond indicated that it would license the trademarks back to Kirkland’s for use in existing retail stores and associated e-commerce websites.
- Enhanced Collaboration Terms. Beyond and Kirkland’s have also entered into an amended and restated collaboration agreement whereby the parties have agreed to increase the collaboration fee Beyond receives from 0.25% to 0.50% on all of Kirkland’s brick-and-mortar retail revenue to capture expanded branding opportunities. The new collaboration agreement eliminates Kirkland’s prior 3% royalty obligations on net sales in Kirkland’s-operated Bed Bath & Beyond and Overstock retail locations.
- Updated License and Store Strategy. The parties have amended their existing license agreement to include a right that will allow Kirkland’s to open and operate Bed Bath & Beyond Home and Buy Buy Baby stores within the previously established neighborhood format retail footprint.
- Strengthened Capital Structure, Flexibility and Governance. The transaction further includes the removal of transfer and voting restrictions associated with the shares of Kirkland’s stock that were previously issued under a subscription agreement, the removal of the standstill period previously in effect under the investor rights agreement, and the addition of provisions that allow Beyond to appoint one additional nominee to the Kirkland’s board of directors.
Amy Sullivan, Kirkland’s president and CEO, noted, “We’re grateful for Beyond’s ongoing partnership as we continue to reshape our business. This additional capital, along with supporting our operational needs, enables us to accelerate store conversion plans as we prioritize the rollout of Bed Bath & Beyond Home stores, as well as Overstock stores, and continue plans for opening Buy Buy Baby and Bed Bath & Beyond True Blue stores. We see a tremendous opportunity to leverage the power of these brand names, which we believe will drive more consistent traffic, improve inventory turns and ultimately raise the productivity of our store base. In addition, Bed Bath & Beyond Home not only allows us to maximize our current Kirkland’s Home-branded décor and furnishings, but it gives us permission to expand into legacy Bed Bath & Beyond brand categories such as textiles and tabletop to offer décor for every budget and every corner of your home. We look forward to the opportunities ahead that we believe will better position the business for long-term success and deliver value to all stakeholders.”
Bed Bath & Beyond “True Blue” stores, as Beyond and Kirkland’s identify them, will offer a home and housewares mix comparable to the banner’s legacy operation, while Bed Bath & Beyond Home locations will concentrate on home decor and furniture with select complimentary housewares lines.
