Another Deal Cooking: VF Corp. Said in Talks For Nautica Acquisition

VF Corp. could be the next company to land a big designer name, as sources say it is involved in intense negotiations to acquire Nautica Enterprises.

VF is known for its solid execution and sound management, but the company hasn’t had an ideal track record with designer names. Through the Nineties, it licensed the Marithé and François Girbaud jeans line in the U.S. While the collection grew quickly to a peak of $250 million in 1992, it soon petered out.

As reported, Nautica’s decision to entertain suitors came in response to a filing last week by Barington Cos. that it was dropping former Macy’s West chief Michael Steinberg from the list of directors it was proposing for election to Nautica’s board via proxy, leaving William Fox and James Mitarontonda as its nominees. Barington continues to seek the unseating of two directors, John Varvatos and Charles Scherer, at Nautica’s annual meeting July 8, but with Steinberg’s removal, it no longer opposes the reelection of Steven Tishman to the board.

Barington, which owns 3.1 percent of Nautica, issued a press release Monday saying it continued to seek representation on Nautica’s board of directors, noting, “The Barington Cos. group believes that Nautica has shown poor operating performance, which has caused a material reduction in shareholder value. The Barington Cos. group believes this is attributable to the current board’s limited independence and disappointing oversight of operations. The Barington Cos. group believes that the current board of directors lacks representation from a sufficient number of independent and experienced directors who will advocate the interests of all stockholders.” The statement carried a quote from Mitarontonda, saying: “We are pleased that Nautica has announced it is in discussions about the possible sale of the company.”

Several market observers believe Nautica would make a great acquisition for VF Corp.

Paul Altman, vice president of The Sage Group, a Los Angeles-based investment banking firm that advised Earl Jean on its sale to Nautica in 2001, said he hadn’t heard about any VF-Nautica talks. However, he noted, “Nautica is broadly diversified in terms of product, and to a lesser extent, category. Nautica has a solid denim business, but it is not the heart of the enterprise. For VF, jeans are its core business at 55 percent, and it is under threat from Levi’s (because of its Signature line for Wal-Mart), as well as suffering from the general retail slowdown. If VF were to buy Nautica, it would be able to diversify its denim business, bringing it up-market through Nautica Jeans and Earl Jean, while simultaneously diversifying its entire product line away from VF’s heavy reliance on denim.”
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