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Published: Monday, 3/15/2010

Phillips-Van Heusen to buy Tommy Hilfiger for $3B

ASSOCIATED PRESS

NEW YORK - Clothing maker Phillips-Van Heusen Corp. said Monday it has agreed to buy Tommy Hilfiger in a cash-and-stock deal valued at about $3 billion that will put the designer name under the same ownership as Calvin Klein.

The deal adds a prominent brand to Phillips-Van Heusen's stable, which also includes Izod and Arrow. It's expected to help Phillips-Van Heusen introduce some of its brands overseas, where privately held Hilfiger is strong.

Shares of Phillips-Van Heusen, which owns and markets the Calvin Klein brand, rose 12 percent during morning trading and briefly reached a 52-week high.

Phillips-Van Heusen, based in New York, said the combined company's revenue will total about $4.6 billion. In a call with analysts, Phillips-Van Heusen CEO Emanuel Chirico said the new company will be "focused on international growth" and a "highly complementary company with iconic brands."

About 60 percent of the combined company's revenue will come from the U.S. and 40 percent will come from overseas, Chirico said. About 45 percent of revenue will be wholesale, 45 percent retail and 10 percent licensing.

Tommy Hilfiger will remain in his role as principal designer, setting the vision for the Tommy Hilfiger brand.

The Tommy Hilfiger brand, which became famous for its brand of preppy clothes and built big shops next to other powerhouse designer names such as Calvin Klein and Ralph Lauren in U.S. department stores, has had rocky times. By the late 1990s, the brand lost its appeal and underwent a series of fashion makeovers to turn around sales. Department stores reduced the size of its displays.

However, under Apax's control, Tommy Hilfiger's business underwent a revival in U.S. sales in the U.S. as it turned back to its preppy roots in the last few years and sought to boost profitability.

In 2007, Tommy Hilfiger struck an exclusive partnership with department store operator Macy's Inc. to sell its clothing, a move that has helped shore up business. The company's fragrance, home furnishings, accessories and other products are still being sold at other stores as well as Macy's. The clothing also is sold at the brand's own stores and Web site.

Fred Gehring will continue as CEO of Tommy Hilfiger, and also become CEO of Phillips-Van Heusen's international operations. He will also join the Phillips-Van Heusen board of directors.

The sale does not require a shareholder vote and is expected to close in Phillips-Van Heusen's second quarter.

PVH said it expects the deal to immediately help earnings by 20 cents to 25 cents per share, excluding one-time items, beginning in the current fiscal year ending Jan. 30, 2011.

It said the deal will help earnings by 75 cents to $1 in the fiscal year ending Jan. 29, 2012.

Phillips-Van Heusen expects to save $40 million annually as a result of the deal.

The deal includes approximately 1.9 billion euros in cash ($2.6 billion) and 276 million euros ($379.9 million) in Phillips-Van Heusen stock.

Phillips-Van Heusen will also assume 100 million euros ($137.6 million) in liabilities.

A group led by the buyout firm Apax Partners acquired Tommy Hilfiger in May 2006 for about 1.2 billion euros. It said it has invested more than 400 million euros in the business, increased the number of employee by more than 1,000 and the number of stores to 1,002 from 574. Apax will retain a 13 percent stake in the company.

Shares rose $5.84, or 12.2 percent, to $53.55 Its stock has traded between $16.38 and $48.78 over the past year.



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