Move to unite Calvin Klein textiles under one roof
American PVH Phillips-Van Heusen Corporation, headquartered in New Jersey, a clothing maker whose brands include Tommy Hilfiger (bought in 2010), Izod and Calvin Klein Sportswear has agreed to pay USD 51.75 in cash plus nearly a fifth of share of its stock for each share of Warnaco Group Inc. (34 % premium based on trading closing on October 30, 2012; Hedge Fund Blue Harbour Group owns 3 % of the Warnaco shares). The group is licensing the Speedo Brand and Calvin Klein underwear and jeans. The deal should be closed early 2013
If the proposed deal is taking place it would unite the Calvin Klein brand at a single manufacturer.
Over eight years the two firms have discussed a possible merger (six times) of the two companies but talks failed on the simple reason that the parties could not agree who is the larger company. This was however made clear with PVH’s acquisition of the Tommy Hilfiger brand in 2010. Meanwhile the CEO’s changed and talks resumed this past summer, now leading to the mentioned deal. PVH is no household name but it owns many well-known brands and is the biggest menswear supplier to Macy’s department stores.
PVC had acquired eight years ago the Calvin Klein license covering women’s sportswear and men’s shirts and was interested in bringing Calvin Klein underwear and jeans into its portfolio. Sales of Calvin Kline have been expanding by around 13 % annually in recent years. Warnaco will help PVH’s brands to expand internationally as the bulk of PVH’s business is in America with a sizable presence in Europe. Warnaco has factories, retail operations and management in Asia and Latin America, two fast growing markets where many apparel makers hope to expand.
PVC expects that the deal would add to its earnings already in its first full years (without integration costs) and will contribute USD 175 million over three years. PVC revenue rose 27 % to USD 5.9 billion in the fiscal year ended January 29, 2012, driven by the Tommy Hilifiger acquisition and profits increased from USD 54 million to USD 318 million. Warnaco’s revenue rose 9.5 % in 2011 to USD 2.5 billion, but profit fell from USD 139 million to USD 127 million despite restructuring charges.
The final discussions and clearing of the proposed deal was handled in a rather unique conditions during the hurricane Sandy in New York (without electricity and cell phone lines) and in private apartments to guarantee confidentiality!