Altman added that VF would benefit through distribution since there is no significant channel overlap between companies, with VF selling 30 percent of its merchandise through the mass channel and 35 percent through moderate department stores, and Nautica selling most of its products through better department stores and, to a lesser extent, boutiques. “This type of acquisition would give VF a stronger presence with the Federateds of the world,” said Altman.
“That makes an enormous amount of sense,” said Allan Ellinger, managing director of Marketing Management Group, a management consulting firm here. “I think Nautica offers VF some very compelling brands, better distribution and product categories that dock into VF’s core competencies. This would be a situation where one plus one would definitely equal more than two.”
R. Fulton McDonald, president of International Business Development Corp., a management consulting firm here, said he thought a VF-Nautica merger would be a good move. “VF is disciplined, it’s careful and has a lot of feel for the women’s market on a lot of levels. Assuming they integrate those skill sensibilities, they [VF] will be much more successful [in the women’s area] than Nautica by itself,” said McDonald.
On the other hand, Virginia Genereux, a research analyst at Merrill Lynch, wrote in a note Monday that after reviewing Nautica’s public filings, “Nautica is unlikely to be sold.”
“First, Nautica’s disclosure that it is in preliminary merger discussions comes in response to a proxy fight led by the Barington Group, a private investment group seeking two seats on Nautica’s eight-person board of directors, whose agenda may include a sale of the company,” she wrote. She said Barington owns 3.1 percent of Nautica, with an average basis of about $10.60.
She noted that in November 2001, Nautica adopted a shareholders’ rights plan, which would become exercisable only if a person or group other than Sanders buys 15 percent or more of the company’s stock. “Such rights cause substantial dilution to any party trying to acquire the company,” wrote Genereux.