PVH and the Warnaco Group 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 dollars 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 dollars.

With over 8 billion dollars 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 dollars, a 34 percent 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 percent 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 dollars 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 dollars over three years. PVH expects the transaction to be 0.35 dollars per share accretive to earnings in the first full year (fiscal 2013, if the deal closes when currently anticipated).

“This is a unique opportunity to reunite the ‘House of Calvin Klein’ and reinforces 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, added.

PVH 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. Warnaco expects third quarter net revenues of approximately 612 million dollars and expects third quarter earnings per share from continuing operations in line with analyst consensus expectations.
 

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