May 21 (Reuters) - Kontoor Brands said on Thursday it had agreed to sell its Lee denim brand for up to $1 billion to Authentic Brands Group, as the apparel maker streamlines its operations and focuses on higher-growth brands such as Wrangler.
The deal comprises an initial $750 million payment and a potential $250 million earnout tied to future performance under Authentic's ownership, Kontoor said.
Shares of Kontoor were up 1% in premarket trading.
The company, which was spun off from VF Corp in 2019,
has faced persistent challenges with Lee, which has underperformed compared with Wrangler in recent years.
Lee has grappled with uneven demand, particularly in the U.S., and faced stiff competition in the mid-tier denim segment.
During it first quarter, Kontoor began a process to divest the Lee business, aiming to sharpen its focus on aligning the Kontoor brand portfolio with key opportunities, the company said.
Authentic Brands, which owns a portfolio of fashion and lifestyle brands including Reebok and Guess, on Wednesday named Matt Maddox as its new chief executive officer, succeeding Jamie Salter who will transition to executive chairman.
Salter, founder of Authentic Brands, told CNBC he expected to take the company public within the next 12 months.
Authentic generates about $38 billion in "systemwide retail sales", primarily by licensing intellectual property of struggling brands to partners, according to its website.
Morgan Stanley is serving as financial adviser to Kontoor, while Foley & Lardner is acting as legal counsel.
The deal, which is expected to close in the second half of 2026 pending regulatory approvals, was unanimously approved by Kontoor's board.
(Reporting by Sanskriti Shekhar in Bengaluru; Editing by Maju Samuel)
