Bloomberg News

Tommy Hilfiger Calls Off IPO After Markets Decline

January 24, 2008

Tommy Hilfiger Corp., the fashion brand owned by Apax Partners Worldwide LLP, became at least the fifth company in Europe to delay an initial public offering after stock markets tumbled.

Hilfiger said today it may sell shares in Amsterdam once ``market conditions have stabilized.''

Hilfiger's IPO was put on hold a week after being unveiled as tumbling markets derailed offerings including Carrefour SA's property unit and Italian pharmaceuticals company Philogen SpA. Apax, which bought the label in 2006 for $1.6 billion, worked with Chief Executive Officer Fred Gehring to revive the brand in Europe after U.S. teenagers defected to trendier labels and American department stores cut back orders earlier this decade.

``Sometimes it can be more difficult to sell shares than clothes,'' said Armando Branchini, vice president of Milan-based Intercorporate, a consulting company specialized in luxury goods. Hilfiger's ``spring-summer collection appears to be selling better than his stock in this bear market.''

Stock markets are the most volatile in five years amid deepening concern that a U.S. recession is likely and bank losses linked to the subprime mortgage crisis still aren't contained. The pan-European Dow Jones Stoxx 600 Index (SXXP) has slumped more than 20 percent from a 6 1/2-year high set on June 1.

Fashion IPOs

The Chicago Board Options Exchange Volatility Index, or VIX, derived from prices paid for Standard & Poor's 500 Index options in the U.S., has more than tripled in the last year.

The turmoil may sideswipe other planned IPOs. Italian luxury brands Prada SpA (1913) and Salvatore Ferragamo SpA had also planned their own share sales for the first half of this year, people familiar with the plans said last month. An IPO announced in July by KKR & Co. LP, the private-equity firm run by Henry Kravis and George Roberts, is still pending.

``We are working with our advisers to determine the best timing,'' Prada spokesman Tomaso Galli said, adding that no decision has been made. Prada confirmed Jan. 17 it still plans to seek the IPO this year. Ferragamo Chief Executive Officer Michele Norsa wasn't immediately available to comment.

Norse Energy Corp. ASA delayed listing its Brazilian oil and gas unit. European companies including Dong Energy A/S and Energie AG Oberoesterreich delayed IPOs earlier in January.

Credit Suisse Group (CSGN) was coordinating the IPO, with Fortis and Morgan Stanley the joint bookrunners.

Minimum Valuation

A spokesman from Hilfiger, which moved its headquarters to Amsterdam from New York under Apax's ownership, declined to comment on any figures regarding the company or on when the IPO may be revived. The Financial Times yesterday said that London- based Apax wanted a minimum valuation of $2.5 billion for the label, including debt.

In February of 2006, as the company was being bought, Hilfiger reported third-quarter net income fell 23 percent to $15.5 million and sales slid 7.9 percent to $396.6 million.

The buyout firm and Hilfiger managers planned to sell stock in the offering, according to an e-mail by Morgan Stanley (MS:US) on Jan. 15. Bids for the shares were to be taken up to Feb. 4 and presentations to market the IPO were to begin tomorrow.

``Tommy Hilfiger is a very strong business and has been performing well in all geographical markets and product divisions over the past two years, including during recent months of economic uncertainty,'' the statement said.

It may take months for companies to come back to the market after abandoning IPO plans. Buyout firm Blackstone Group LP sold shares in Cineworld Group Plc, the second-biggest U.K. cinema chain, in April, 10 months after it scrapped plans to go public.

Snoop Dogg

Tommy Hilfiger, known in the 1990s for its red-white-and- blue-splashed fashions, was started by its Elmira, New York-born namesake designer, who opened a boutique while still a high- school student. He owns a minority stake and is no longer active in the business.

The company first went public in 1992 and raised annual sales to almost $2 billion in 2000 after its clothing became popular with musicians including rapper Snoop Dogg.

The label put itself up for auction after losing orders from U.S. department stores, its largest customer, as chains including Federated Department Stores Inc. and May Department Stores Co. merged.

Tommy Hilfiger acquired majority control of its Japanese license from Itochu Corporation on Jan. 8. In October, the fashion company entered into an exclusive distribution agreement with Macy's Inc. starting with the fall-winter 2008 collection for men's and women's sportswear. Hilfiger also owns the Karl Lagerfeld business, which it acquired in January 2005.

To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net.

To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net.


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