Traditional dress shirt maker Phillips-Van Heusen Corp (PVH) on Tuesday confirmed it has agreed a deal to buy world-famous fashion label Calvin Klein for $430 million.

The New York-based company said it will pay $400m in cash and about $30m in stock for the 34-year-old label, although the final price could top $700m depending on its future performance.

It will acquire a business consisting mainly of the design studio and a number of licenses for Calvin Klein products, but not its well-known jeans and underwear brands, which are controlled by Warnaco Group Inc.

Calvin Klein was put up for sale in 1999 by its namesake designer and partner Barry Schwartz.

"Calvin Klein is one of the most powerful lifestyle brands in the world and has tremendous untapped growth potential that we look forward to working with Calvin to realise," said Bruce Klatsky, chairman and CEO of PVH.

"We have tremendous respect for what Calvin, Barry Schwartz and their team have built and are strongly committed to preserving the integrity of the brand as well as its exclusive distribution."

He described the deal as a "transforming transaction" that will have a major impact on accelerating PVH's top line growth, profit margins and earnings.

Mr Klein added: "This combination is all about growing our brand and business over the long term in multiple markets and consumer segments.

"Phillips-Van Heusen understands and appreciates the unique values and integrity of the brand and has the infrastructure and financial capabilities to expand the business beyond what we can achieve as a private company."

PVH said key opportunities to grow the Calvin Klein business include the launch of better men's and women's sportswear and accessories lines; global expansion through a strategic plan together with its licensing partners; global expansion through Calvin Klein retail stores, and taking advantage of additional growth opportunities in Europe and Asia.

It added it expects to launch the new collection of men's and women's better sportswear within the next 24 months.

The deal, expected to close within 60 days, will be "somewhat" dilutive to PVH's earnings in 2003 but make a positive contribution to fiscal earnings by 2004.