Phillips-Van Heusen Said to Be Close to Hilfiger Deal (Update1)
March 15, 2010, 4:33 AM EDT(Adds more background on Tommy Hilfiger from 10th paragraph.)
By Cotten Timberlake
March 15 (Bloomberg) -- Phillips-Van Heusen Corp. may reach an agreement to buy apparel maker Tommy Hilfiger from Apax Partners LLP for about 2.2 billion euros ($3 billion), according to a person briefed on the discussions.
A cash-and-stock deal may be announced as soon as today, the person said. The talks were reported yesterday by the New York Times. Apax, the London-based private-equity firm, bought Tommy Hilfiger in 2006 for about $1.6 billion.
A purchase would add Tommy Hilfiger, which introduced its first menswear collection in 1985, to Phillips-Van Heusen clothing lines that include Calvin Klein and Izod. Phillips-Van Heusen is seeking brands that can grow globally and boost profitability, Chairman and Chief Executive Officer Emanuel Chirico said last week at a Bank of America Merrill Lynch investor conference. He declined to identify potential targets.
“What is key to us is a strong brand that has enormous growth potential in North America and around the world,” Chirico said at the March 11 conference. “Any acquisition we do would be accretive to margins in the first full year.”
Cindy Leggett-Flynn, a spokeswoman for Tommy Hilfiger, didn’t immediately respond to calls and an e-mail for comment outside of regular business hours. Pamela Hootkin, a Phillips- Van Heusen spokeswoman, didn’t respond to an e-mail or a message left at her office. Apax spokesman Ben Harding didn’t pick up a call to his cell phone seeking comment.
Additional Earnings
Phillips-Van Heusen has gained 17 percent in New York Stock Exchange composite trading this year and rose 7 cents to $47.74 on March 12, the last day the stock traded. The New York-based company has a market value of about $2.5 billion.
Tommy Hilfiger could add 30 cents a share in profit in its first year, JPMorgan Chase & Co. analysts Christopher Kim and Brian Tunick wrote in a March 9 research note. The company has a strong European business, which could be used to help bolster the non-Calvin Klein brands at Phillips-Van Heusen, the New York-based analysts wrote. Phillips-Van Heusen’s Arrow and Izod brands generate little or no revenue in that region, they said.
Tommy Hilfiger, based in Amsterdam, made 270 million euros in earnings before interest, taxes, depreciation and amortization on 1.6 billion euros in sales in the year ended March 2009, the JPMorgan analysts said.
They estimated the value of Tommy Hilfiger at $3.4 billion and assumed that Phillips-Van Heusen would finance such a deal by paying 20 percent in stock to Apax, and the remainder with debt at an 8.5 percent interest rate.
Delayed IPO
In January, 2008, Tommy Hilfiger delayed an initial public offering in Amsterdam after stock markets tumbled. Apax and Chief Executive Officer Fred Gehring have sought to revive the brand for almost five years, after U.S. and European teenagers defected to trendier labels such as Abercrombie & Fitch Co.
Tommy Hilfiger first went public in 1992 and increased annual sales to almost $2 billion in 2000 after its red-white- and-blue-splashed clothing became popular with musicians including rapper Snoop Dogg. The clothing company was started by its Elmira, New York-born namesake designer, who opened a boutique while still a high-school student.
--With assistance from Jeroen Molenaar in Amsterdam. Editors: Jennifer Sondag, Stefanie Batcho-Lino.
To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net
To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net
