CNBC has exclusively learned that David's Bridal is planning to spin off its artificial intelligence platform Pearl into an independent listed company, with a target valuation of approximately $350 million.
The company expects that this transaction will be completed in the first half of 2027.
David submitted a non-binding letter of intent on Thursday, proposing to spin off Pearl. This business, centered around artificial intelligence, will hold the intellectual property rights of David's Bridal and seeks to continue expanding based on its growing AI model; meanwhile, the original company will strive to strengthen its physical retail business.
"Pearl is currently a rapidly growing business with high profit margins and is generating positive cash flow. Going public now will help us attract talent and give us more options in pursuing the growth opportunities we see," said Kelly Cook, the CEO of David. She will assume the role of CEO of Pearl after the transaction is completed.
Cook indicates that the two companies will provide collaborative services to customers throughout the entire wedding preparation process, and they described this split as 'laying the groundwork for strategic growth for both companies.'
Pearl's services include a wedding planning platform driven by a proxy AI, a proprietary tool designed to simplify appointments and communication, as well as a digital content network that provides original programs. The platform utilizes AI to offer personalized recommendations based on data collected for each client.
David and Bridal predict that Pearl's EBITDA profit margin this year will exceed 30%, and they expect its revenue to grow by more than 100% by 2027, reaching over 85 million US dollars. According to the company, after the transaction is completed, Pearl is expected to be debt-free and to achieve positive free cash flow in the next two years.
“Pearl has proven its ability to develop independently, as the value it creates has exceeded our expectations,” said Cook.
After the transaction is completed, Pearl will hold the intellectual property rights of Bridal owned by David, and then grant authorization for its use to this chain enterprise.
"This is a very healthy business model," said Cook.
She also stated that the demand for these two services remains strong. Grand View Research estimates that the U.S. wedding service market will exceed $96 billion by 2026, and both Pearl and David's Bridal aim to be at the forefront of this niche market.
She said that the two companies will continue to maintain a “relationship based on mutual benefit,” sharing proprietary data and directing customers to the other business to proceed to the next step in wedding planning. She added that the split will allow each company to further focus on its own priorities.
However, at the time this listing plan was launched, AI's stock was facing pressure. The initial public offering (IPO) market for consumer companies has been lackluster, with more and more companies postponing their public listings, and investors have also begun to lose confidence in the AI craze.
Cook indicates that the difference between Pearl is that this company 'is not doing AI for the purpose of AI.'
“Most AI companies have to go out and find customers first,” she said, “but we already have her… We have access to her information. This is less about AI itself, and more about completely transforming this ecosystem that urgently needs modernization for her.”
David's Bridal is no stranger to financial difficulties. The company applied for bankruptcy protection in 2018 and completed reorganization a few months later. Subsequently, in 2023, it applied for bankruptcy protection for the second time due to a significant slowdown in business caused by the pandemic and high inflation. To avoid closure, the company later sold its business to the asset management company Cion Investment Corp.
As part of the split transaction, Cion has proposed to invest $25 million in this independent company as a anchor investor.
Cook took over as CEO last year, helping the company transform from a traditional retailer into an enterprise with a more unified online and offline experience. She stated that the company "went through a difficult period," but these struggles ultimately led to the decision to split up the business.
“This isn’t any secret; we’ve been discussing it openly all along,” she said. “What’s truly remarkable is that this process has ultimately resulted in a more streamlined David, a more focused David… I think this is an action based on strength.”
