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Published: Tuesday, 3/16/2010

Hilfiger sold in $3B deal

ASSOCIATED PRESS

NEW YORK - Clothing maker Phillips-Van Heusen Corp. said yesterday it has agreed to buy Tommy Hilfiger BV from private-equity firm Apax Partners LP 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 Hilfiger is strong.

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 Chief Executive Officer 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 United States and 40 percent will come from overseas, Mr. 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.

However, Tommy Hilfiger's business underwent a revival in U.S. sales 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.

The company was started in 1985 by its Elmira, N.Y.-born namesake designer. Mr. Hilfiger had previously opened a boutique while still a high-school student.

Fred Gehring will continue as chief executive officer of Tommy Hilfiger, and also become CEO of Phillips-Van Heusen's international operations.

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

Phillips-Van Heusen expects to save $40 million annually as a result of the deal. The deal includes approximately $2.6 billion in cash and $379.9 million in Phillips-Van Heusen stock.

Phillips-Van Heusen also will assume $137.6 million in liabilities.

A group led by the buyout firm Apax Partners acquired Tommy Hilfiger in May, 2006, for about $1.5 billion. It said it has invested more than $550 million in the business and increased employees by more than 1,000 and stores to 1,002 from 574. Apax will retain a 13 percent stake in the company.



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