Blog: Leonie BarrieHilfiger buy a one-time opportunity

Leonie Barrie | 16 March 2010

Having had its plans to take Tommy Hilfiger public through an initial public offering scuppered because of the recession, the company's management is not surprisingly putting a bright face on the $3bn takeover deal agreed yesterday with Phillips-Van Heusen.
Describing it as a "once in a lifetime" opportunity, the synergies between the two firms are apparent. Hilfiger's presence in Europe and Asia will provide an international stepping stone for some of PVH's brands to follow suit, while the combined strength of the companies - with their joint global revenues of $4.6bn - will give Hilfiger additional clout for growth, especially in retail.
If reassurance were needed then it comes in the shape of Calvin Klein, which PVH bought in 2003 for $430m. The contemporary fashion brand has consistently led buoyant results at the apparel maker, with a 20% jump in royalties expected in the fourth quarter. Yet the label has managed to retain its own brand and identity despite being part of a multi-billion dollar business.

The only fly in the ointment, perhaps, is the $2.5bn debt involved, which has prompted some analysts to consider cutting their ratings on PVH.

The deal will also have raised hopes that more takeovers may be in the pipeline, after flagging up the opportunities that now exist in an industry that has been buffeted by falling sales for the best part of two years. Companies like Hanesbrands and Li & Fung have made no secret of the fact they're interested in buying other firms, and smaller but well-established brands may prove ideal targets.


Spotlight on...Tommy Hilfiger buyout


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