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Iconix Approaches Tommy But Hilfiger Plays It Cool

Iconix Brand Group knocked on J.P. Morgan Chase's door looking to make a bid for Tommy Hilfiger Corp., but got a chilly response.

The banker was referring to a deal that he's done with designer Max Azria, securitizing the BCBG trademarks, a business that included a retail operation. In addition, D'Loren has worked on a number of deals involving high-end design houses, including the purchase by Iconix of Badgley Mischka from Escada AG last November.

The asking price on Hilfiger is at least $1.82 billion, but could go as high as $2.16 billion, according to financial sources. Designer Tommy Hilfiger is expected to get $250 million in cash as a buyout of his contract if a deal goes through.

Li & Fung USA is one of the companies mentioned as a possible lead buyer for Hilfiger. The company is a sourcing firm that is now focusing more on global brand management. The parent company is Hong Kong-based Li & Fung Ltd.

Jones Apparel Group also is being discussed as a potential buyer. In 2003, Jones held exploratory talks with Hilfiger, but no deal was struck. However, Jones is believed to have had contact again with Hilfiger recently, according to industry and financial sources. A third company talked about is Liz Claiborne.

Late last week, Merrill Lynch analyst Virginia Genereux sent out a research note on Tommy Hilfiger Corp. She wrote, "Industry contacts confirm our view that the Tommy brand still has tremendous value, with a robust international business, a material stream of licensing revenues, a now-manageably sized U.S. wholesale business and zero exposure to the moderate channel, which the recent success of Chaps has highlighted as an opportunity."

Genereux said recent deals for "publicly traded targets in our sector suggest a willingness on the part of buyers to pay premium multiples for companies like Tommy, with underdeveloped brands and/or some margin expansion opportunity."

Last month, Iconix completed an $80 million acquisition of the Joe Boxer brand from Windsong/Allegiance Apparel Group. The purchase price for Joe Boxer was $40 million in cash, 4,350,000 shares of restricted stock and an assumption of $11 million in debt, the company said. The brand, through an agreement with Kmart and international licensees, generates $20 million in annual royalty income. Financing for the $80 million deal was through an increase of Iconix's current asset-backed securitization note that is secured by the firm's intellectual property. UCC was the underwriter on the deal.

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