US: Phillips-Van Heusen to buy Tommy Hilfiger in $3bn deal
Emanuel Chirico, Tommy Hilfiger, Fred Gehring strike multi-billion dollar deal (Photo: Business Wire)
US apparel firm Phillips-Van Heusen (PVH) today (15 March) revealed it is to buy fashion brand Tommy Hilfiger for $3bn, in a move that will create one of world's largest and most profitable clothing companies.
New York clothing retailer PVH, which also owns the Calvin Klein brand, said the deal includes EUR1.924bn in cash and EUR276m in PVH common stock, plus the assumption of EUR100m in liabilities.
The combination of the two companies will create a global business with combined revenues of $4.6bn, and a brand line-up that includes Arrow and Izod as well as licenses for brands like Geoffrey Beene and Kenneth Cole New York.
"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.
Netherlands-based Tommy Hilfiger BV, which is controlled by private equity firm Apax Partners, in October posted a 3.5% increase in first half sales, boosted by a surge in retail revenues from its European business.
Hilfiger's international presence and infrastructure will provide a platform for PVH to introduce a number of its brands into the international market.
And the scale of the combined company in the US will undoubtedly deliver obvious benefits for both companies too.
"This transaction provides us with the perfect platform to support continued growth and success. We look forward to building on the momentum of the two companies," added Fred Gehring, CEO of Tommy Hilfiger.
During the last four years as a private company, Tommy Hilfiger has gained momentum in Europe and Asia, while successfully rebuilding its business in North America.
The brand has around 1,000 stores globally, with two-thirds of its sales coming from international sources and one-third from the US.
It is expected to post full year revenues of $2.25bn for the 12 months to 31 March, with earnings before interest and taxes of $280m. Around 46% of this revenue will come from wholesale sales, 52% from retail sales, and 2% from licensing income.
"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 added.
"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."
PVH expects the transaction to add $0.20 to $0.25 per share in its current fiscal year, and gains of $0.75 to $1.00 per share in the year to 29 January 2012.
One-time costs linked to the transaction are estimated at $100m, but PVH says synergies between the two businesses are likely to yield annual savings of $40m.
Tommy Hilfiger will continue as principal designer and visionary for the Tommy Hilfiger brand, while Fred Gehring will continue as CEO of Tommy Hilfiger and will also add responsibility as CEO of PVH's international operations, and will join the PVH board of directors.
Hilfiger described the deal as "the next phase in the global evolution and expansion of the Tommy Hilfiger brand."
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