PVH to acquire Warnaco for 2.9 billion dollars

Multibrand group PVH, which own brands such as Calvin Klein and Tommy Hilfiger, has nailed an agreement to acquire competitor The Warnaco Group in a cash-and-stock deal worth close to 2.9 billion dollars.  The resultant company will be one

of the world's largest branded lifestyle apparel companies. Holders of Warnaco common stock will receive 51.75 dollars in cash and 0.1822 of a share of PVH common stock for each share of Warnaco common stock.

“ThisPVH to acquire Warnaco for 2.9 billion dollars 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.”

The transaction values Warnaco at approximately 2.9 billion dollars and, 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 34percent 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.

Other substantial management change will be the nomination of Tom Murry, chief executive of Calvin Klein, who will be running business at Warnaco's Calvin Klein following the close of the deal in 2013.

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 percent 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 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), excluding one-time integration costs and transaction expenses but including the effect of the potential loss of a license. When the 100 million dollars of expense synergies are fully realized in year 3, PVH would expect the transaction to be accretive to earnings by 1 dollar per share, excluding one-time integration costs and including the effect of the potential loss of a license.

The deal value is based on Warnaco's 40.87 million shares outstanding as of August 1, reported ‘The Chicago Tribune’.


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