Continued: Wilsons: Seeking the right fit

The history of Wilsons the Leather Experts is starting to resemble the movie "Groundhog Day," in which the lead actor is forced to relive the same day over and over again with the same cast of characters.

On Tuesday, the Brooklyn Park company sold its most prized assets -- including its name, website and 116 outlet stores -- to a New York clothing company, G-III Apparel Group Ltd., that was once one of Wilsons' largest suppliers.

Turns out G-III is run by Morris Goldfarb, a close friend and longtime business associate of Wilsons founder and casino magnate Lyle Berman, who has flipped Wilsons more times than a Vegas poker chip.

Berman led a leveraged buyout of Wilsons in 1987, only to sell the chain a year later for $220 million. Then, in 1996, Berman and Goldfarb teamed up to take Wilsons private, for the second time, for $67.8 million. Goldfarb currently sits on the board of Berman's casino company, Lakes Entertainment Inc.

And, in another déjà-vu twist, Goldfarb has recruited Joel Waller, who served as Wilsons' CEO for 21 years, as president of G-III's outlet store division. "We know the business, we know the people, we know the product," declared Goldfarb, in a Wednesday conference call with investment analysts.

Indeed, were it not for the deep ties between the two retailers and their executives, Wilsons might never have orchestrated Tuesday's sale -- and its future would have looked even more dismal than it does now, said analysts who follow the companies.

The deal will generate $22.3 million in cash for Wilsons, at a time when the company desperately needs money to retrofit its money-losing mall stores.

But even with this cash infusion, there is no guarantee of success. Over the past five years, Wilsons has fought a losing battle against discounters and a general shift away from the leather-clad look popularized in the 1980s. Shares of Wilsons stock have inched up just 3 cents, to 13 cents a share, since the deal was announced Tuesday.

"The market is signaling that it doesn't believe the company is going to make it," said Eric Beder, a retail analyst at Brean Murray.

Yet, in the eyes of many retail observers, Wilsons' fate rested on its ability to orchestrate a deal with G-III. The company's cash was depleting so rapidly that its independent accountant said it had "substantial doubt" about its ability to stay in business, according to its annual report. The Brooklyn Park-based chain lost its CEO in April and is in danger of being delisted by Nasdaq.

Even G-III, which had once considered Wilsons one of its top five customers, had stopped doing business with Wilsons for fear that the company would not be able to make its payments, said Goldfarb in an interview.

"If there hadn't been someone out there that really understood the business, then this probably would have been a fire sale," said Love Goel, chief executive officer of Growth Ventures Group, a Minnetonka private equity firm focused on the retail sector.

Jobs stay in Brooklyn Park

For now, Wilsons remains intact -- albeit as a much smaller entity and with a different name. On Tuesday, the company announced it had changed its name to PreVu Inc. Its 100 mall-based stores will be converted into accessories boutiques.

Goldfarb plans to run his newly acquired business out of the Wilsons headquarters in Brooklyn Park. It will employ about 900 of Wilsons' employees.

Goldfarb said he plans to use Wilsons and its management team as a foundation for G-III's launch into direct retail. Traditionally, G-III has been a supplier of brand-name apparel and leather goods, but has not operated its own stores. Some Wilsons outlet stores may be closed, but most will remain open, Goldfarb said.

This is not uncharted territory for G-III. Twice in the past four years, the company has offered to buy an ownership stake in Wilsons but has been outbid by other firms.

"We accomplished two things," Goldfarb said of the deal. "We created our own customer [in Wilsons], and we help the remaining Wilsons stores continue to build and pay their bills."

Added Goldfarb: "Had we not come to the table, another 1,000 people would have been out of work. The intent here is to build it."

The one person conspicuously absent from the recent round of dealmaking is Berman, who also had his eyes on Wilsons. Berman said that two months ago he approached Goldfarb, whom he described as "a close friend," and asked him if he wanted to team up and buy Wilsons. Such a deal, had it occurred, would have effectively taken Wilsons private for the third time.

But Goldfarb wanted to operate Wilson's as an arm of G-III, while Berman wanted to continue operating it as an independent chain. The two never got beyond the discussion phase.

Now Berman, whose family founded Wilsons predecessor company in 1899, is out of the picture. He stepped down from Wilsons' board of directors three years ago and no longer owns any of its shares. "The new business team after I left the board, I think it's fair to say, didn't understand the business very well," he said. "I have no feelings about it one way or the other."

Chris Serres • 612-673-4308