Tommy Hilfiger Brand Sold for $3 Billion
In an agreement that will bring more spotlight to the international catwalk, Phillips-Van Heusen Corp. (PVH) has agreed to a $3 billion deal to purchase clothing company Tommy Hilfiger B.V.
The deal consists of 1.924 billion euros ($2.64 billion) in cash, 276 million euros ($379.2 million) in PVH common stock and 100 million euros ($137.4 million) in liabilities.
PHV, which also owns Calvin Klein and Izod labels, expects that the multi-billion dollar deal will increase its footing in the international markets, particularly in Europe and Asia. The company has also stated that the deal could boost earnings by 20 cents to 25 cents a share, excluding items, in the current fiscal year, and the fiscal year ending January 29, 2012 could result in a profit boost of 75 cents a share to $1.00 a share.
“This is a unique opportunity to bring together two premier companies, each with iconic brands, which will deliver enhanced opportunities for our stockholders, business partners, customers and employees as we leverage a combined global platform in the years ahead,” said Emanuel Chirico, Chairman and Chief Executive Officer of PVH. “During almost four years as a private company under the leadership of Fred Gehring and his team, Tommy Hilfiger has continued to gain momentum in Europe and Asia, while successfully rebuilding its business in North America, producing impressive overall performance, and generating strong profitability and free cash flow even during the recession.”
Tommy Hilfiger B.V. is being sold by funds affiliated with Apax Partners L.P. just four years after the company was purchased in a public-to-private deal that was valued at approximately $1.6 billion. Prior to that deal, the brand had suffered significant market losses in the U.S. However, Apax managed to revaluate the famous brand’s U.S. business operations and capitalized on a strategy that repositioned and restructured the company.
“Tommy Hilfiger fits all of our acquisition criteria: a strong brand, superior management, highly profitable, immediately accretive to earnings, and focused on international growth,” Chirico said. “We also believe that our cultures are highly compatible. All of this makes us confident that this compelling combination will generate strong revenue growth, high operating margins and substantial free cash flow, which should enable us to reduce debt very quickly while continuing to grow the companies’ respective brands and businesses.”
According to PVH, the company could see $40 million in annual cost savings from the business deal and expects finalizations of the transaction to be made in the second quarter.
When the deal is finalized, Tommy Hilfiger will stay aboard as the principal designer and visionary for the famous brand. Fred Gehring will also keep his position as CEO of Tommy Hilfiger and will also join the PVH board and serve as CEO of international operations.