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Roots Canada Ltd. is entering a new era as co-founders Michael Budman and Don Green cede majority control of the 42-year-old chain to a private equity firm amid a more intense fashion retail landscape.

Known for its Canadiana and iconic beaver logo, Roots built its business on what the co-founders coined "rustic luxury." They started in 1973 with the popular "negative heel" shoe, moved on to sweatpants and sweatshirts, and gained a global profile by outfitting Olympic Games athletes. More recently, they refocused on their retailing roots of leather goods and athletic wear.

On Monday, the founders said Searchlight Capital Partners LP, an investment firm based in Toronto, New York and London, bought a majority stake in Roots for an undisclosed amount in a bid to expand the retailer in North America, Europe and Asia.

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Mr. Budman, 69, and Mr. Green, 66, will remain "actively" involved in Roots and be "substantial shareholders," they said. But industry observers view the move as the passing of the torch and a milestone for the chain as it pushes to raise its image amid mounting competition that has seen a number of weaker brands falter.

"Don and I really have put the company ahead of ourselves and are doing the right thing for the evolution and expansion of Roots," Mr. Budman said in an interview after he and Mr. Green played a morning game of hockey.

With 245 stores, 115 of them in Canada, five in the United States and 125 in China and Taiwan, Roots' international recognition peaked in the early 2000s when the company became an Olympics outfitting champion.

Mr. Budman said the privately-held company has enjoyed a banner 2015 in business as it expanded into Asia and benefited also from e-commerce and wholesale revenues. The Toronto-based retailer would not confirm any sales estimates.

Roots has "built a strong and historically unique brand with lots of untapped potential – time to use it or lose it," said Joe Jackman, founder of retail consultancy Jackman Reinvents. "Great brands constantly create new news, and they have been relatively quiet for a while."

Mr. Jackman said that while Roots has worked hard to own a big slice of Canadian "lifestyle" sales of stylish fashions, other rivals – ranging from luxury coat specialist Canada Goose to department store retailer Hudson's Bay Co., which now includes Saks Fifth Avenue – "are doing more exciting things in the space."

But he said he hopes the acquisition by Searchlight "will be a catalyst for more exciting and unique things to come from Roots."

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Sandy Silva, Canadian fashion industry analyst at market researcher NPD Group, said the Roots co-founders have accomplished a great deal and "now it's time for them to take a look at it from a different vantage point."

She said the brand needs to re-think how to draw more young millennials, partly by marketing its Canadian identity and made-in-Canada edge for a generation that appreciates locally produced goods.

For Mr. Budman and Mr. Green, both Americans who fell in love with Canada after going to camp in Algonquin Park, Roots was a family affair. Their wives, Diane Bald and Denyse Green, have played key roles at the retailer. But Mr. Budman said none of their five children among them (two Budmans and three Greens) are destined to go into the business, all having carved out different careers. He said he's seen many other family businesses deteriorate under second generation rule.

He said a number of other would-be suitors have approached Roots over the years but Searchlight shared Roots' vision for international expansion and keeping its focus on its Canadian heritage and treating its staff, customers and the environment well. And he said investment bankers have urged Roots to go public, but it wasn't interested.

The brand remains strong, Mr. Budman said. "We know it's not tired because so many people love to wear it on their chest and wear it proudly."

Searchlight co-founder Erol Uzumeri said he was introduced to Roots through lawyer Dale Lastman at Goodmans LLP, which is Roots' law firm, although he said Roots wasn't looking for a buyer.

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Mr. Uzumeri envisages investing in boosting Roots' systems, e-commerce, marketing and store count. And he thinks it can increase "outerwear" (coats and jackets,) and footwear sales.

Searchlight's other investments include Hunter Boot Ltd. of Britain and M&M Meat Shops Ltd., Canada's largest specialty frozen food seller.

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