Chasing Tommy: Apax and PVH Said in Lead, but Price an Issue

Apax Partners, in partnership with Phillips-Van Heusen, is in the lead in the bid for Tommy Hilfiger Corp., but the process is said to be "fluid."

Another financial source expects the $1.68 billion price tag would be an opening bid, and that a small bidding war would follow, ending when someone agrees to a price of at least $1.78 billion. Such a price tag presumes a per share price of $18.90, including the cash component. Since the buyer would be keeping the cash to finance the purchase, its real per share cost would be around $17.

Sun Capital has surfaced on and off in the past year as a possible acquirer of Boscov's, a privately held regional department store with most of its stores in Pennsylvania. A source close to the bidding process speculated that Sun Capital might elect to pull out of the chase for Hilfiger should the price tag surpass the $16.50-per-share range, an amount that includes the cash on the balance sheet.

Perry Capital bought Capital Factors in April. Richard Perry, Perry's co-founder, joined the Sears Holdings board in September. One source said Perry's presence on the Sears board might present a potential conflict of interest for Tommy Hilfiger since there is the risk a new owner might place a limit on where Hilfiger products would be sold.

Regarding the role of strategic players like Phillips-Van Heusen working with Apax, the post-deal picture focuses on who would oversee the operational aspects of Hilfiger, sources said. PVH would run the Hilfiger operation and, given its experience with outlet stores, could handle the Hilfiger units as well. But if it were to operate Hilfiger's outlet stores, too, it is likely to garner a sizeable equity stake in the designer company should Apax be successful in its bid.

Apax Partners is the private equity firm that helped PVH acquire Calvin Klein and also has invested in Spyder Active Sports. Apax's investment in PVH was $250 million. Based in New York, Apax Partners' funds have raised about $20 billion around the world. Typically, it makes investments of between $50 million and $300 million.

Regarding brand marketer and sourcing specialist Li & Fung as a possible acquirer, that scenario is seen as unlikely. A source close to Li & Fung said, "An acquisition of the Tommy Hilfiger brand would not be consistent with Li & Fung's corporate strategy. However, the company is always interested in evaluating sourcing opportunities that might arise from such situations."

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