PVH Corp. and the Warnaco Group, Inc. have announced that they have entered into a definitive merger agreement pursuant to which PVH will acquire Warnaco, and holders of Warnaco common stock will receive $51.75 in cash and .1822 of a share of PVH common stock for each share of Warnaco common stock. The transaction values Warnaco at approximately $2.9 billion.
With over $8 billion in pro forma revenue, PVH will be one of the largest and most profitable global branded lifestyle apparel companies in the world, with a diversified portfolio of iconic brands led by Calvin Klein and Tommy Hilfiger, as well as heritage brands – Van Heusen, IZOD, ARROW, Bass, Speedo, Olga and Warner’s.
Based on PVH’s last closing stock price, the per share value of the consideration to be received by Warnaco stockholders is $68.43, a 34 per cent premium over the last closing price of Warnaco common stock.
The merger, which has been unanimously approved by the Boards of Directors of both companies, is expected to close in early 2013, at which time the former Warnaco stockholders will own approximately 10 per cent of the outstanding common stock of PVH. In addition, Helen McCluskey, Warnaco’s President and Chief Executive Officer, is expected to join PVH’s Board of Directors. The Warnaco Board of Directors has unanimously recommended that Warnaco stockholders approve the transaction.
PVH anticipates approximately $100 million of annual run rate synergies from the transaction, which will be fully realized over three years. In order to achieve these synergies, PVH expects to incur one-time costs of approximately $175 million over three years.
PVH expects the transaction to be $0.35 per share accretive to earnings in the first full year (fiscal 2013, if the deal closes when currently anticipated), excluding one-time integration costs and transaction expenses but including the effect of the potential loss of a licence. When the $100 million of expense synergies are fully realized, PVH would expect the transaction to be accretive to earnings by $1 per share, excluding one-time integration costs and including the effect of the potential loss of a licence.
“This is a unique opportunity to reunite the ‘House of Calvin Klein’ and reinforce our strategy to drive the global growth of Calvin Klein,” said Emanuel Chirico, Chairman and Chief Executive Officer of PVH. “Having direct global control of the two largest apparel categories for Calvin Klein – jeans and underwear – will allow us to unlock additional growth potential of this powerful designer brand across all major product categories, geographies and distribution channels. The Warnaco Calvin Klein businesses will be moved onto our Calvin Klein platform under the leadership of Tom Murry, President & Chief Executive Officer, Calvin Klein, to ensure a single brand vision globally.”
Helen McCluskey, President and Chief Executive Officer of Warnaco, said: “This transaction delivers compelling value to our stockholders and significant benefits for the combined company. We are proud of what we have accomplished, driving growth and profitability and increasing our share price by roughly 500 per cent since our restructuring in 2003. Our team has built a strong global infrastructure, expanded our direct-to-consumer footprint and created a solid foundation for long-term growth. We look forward to the opportunities this combination brings to the continued success of Calvin Klein Jeans and Calvin Klein Underwear, the increased potential for our heritage brands, and the future for our associates.”
“PVH has a proven track record of successfully integrating acquisitions. We are confident this transaction will create tremendous value for stockholders, as well as provide enhanced opportunities around the world for both companies’ respective associates, vendors and other business partners,” said Mr. Chirico. “We plan to align Warnaco’s established operations in Asia and Latin America with our strong operations in North America and Europe to fuel our growth strategies for both Calvin Klein and Tommy Hilfiger. We remain firm in our belief that the strength of our brands, the sound execution of our business strategies, and our strong credit profile will continue to drive long-term growth and improvements in our financial performance and business returns in 2013 and beyond.”
The closing of the transaction is subject to customary conditions, including approval by the holders of a majority of the outstanding shares of Warnaco common stock and approval under applicable anti-trust and competition laws. Commitments for $4.325 billion of financing, consisting of a bridge credit facility and a senior secured credit facility, have been received from Barclays, BofA Merrill Lynch and Citigroup Global Markets Inc., subject to customary conditions. The facility will be used to refinance debt, fund the cash portion of the consideration, pay other transaction-related expenses, and provide liquidity for PVH going forward.
Third quarter and full year 2012 guidance
PVH Corp. currently expects its non-GAAP earnings per share for the third quarter and full year 2012 to be at least at the top end of its guidance range previously announced on October 2, 2012.
While its reported results of operations are not yet final, Warnaco expects third quarter net revenues of approximately $612 million and third quarter earnings per share from continuing operations in line with analyst consensus expectations. Warnaco is also reaffirming its previously announced fiscal 2012 guidance, excluding any one-time costs related to the latest transaction announced.
PVH Corp., one of the world’s largest apparel companies, owns and markets the iconic Calvin Klein and Tommy Hilfiger brands worldwide. It is the world’s largest shirt and neckwear company marketing a variety of goods under its own brands – Van Heusen, Calvin Klein, Tommy Hilfiger, IZOD, ARROW, Bass and G.H. Bass & Co. – and its licensed brands, including Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL MichaelKors, Sean John, Chaps, Donald J. Trump Signature Collection, JOE Joseph Abboud, DKNY, Ike Behar and John Varvatos.
The Warnaco Group, Inc., headquartered in New York, is a well-known global apparel company engaged in the business of designing, sourcing, marketing and selling men’s, women’s and children’s sportswear and accessories, intimate apparel, and swimwear under such owned and licensed brands as Calvin Klein, Speedo, Chaps, Warner’s and Olga.