Tommy on the Block: Book Out on Hilfiger, Bidders Are Circling

Tommy Hilfiger Corp. is on the auction block, and the asking price is big: The company could fetch as much as $1.82 billion.

Tommy Hilfiger

Tommy Hilfiger

Photo By WWD Staff

NEW YORK — Tommy Hilfiger Corp. is up for sale, and it may come with a hefty price tag.

According to a source specializing in mergers and acquisitions, Hilfiger is being quietly shopped around to select, potential buyers. A prospectus, known as a "book," is available, but it's not widely circulated, and J.P. Morgan Chase is said to be the investment adviser, according to buy-side analysts.

Sources said the asking price is at least $1.82 billion, but could go as high as $2.16 billion. The deal could net Tommy Hilfiger himself up to $250 million.

Financial sources said a deal could be inked before Thanksgiving, meaning the sale process will proceed fairly quickly over a 60- to 90-day period.

Financial and market sources who have familiarity with the book's contents said Hilfiger's earnings before interest, taxes, depreciation and amortization is projected to be between $260 million and $270 million for the fiscal year ending in March 2007, which is an indication the company is being marketed based on future earnings. The multiple is expected to be seven to eight times EBITDA, bringing the asking price in the range of $1.82 billion to $2.16 billion.

Financial sources familiar with the book's contents said that $250 million from the company's cash could be used to buy out designer Hilfiger's contract. A spokeswoman for Hilfiger did not return calls for comment by press time.

The company, which posted first-quarter earnings results last week, ended the quarter with over $500 million in cash, according to a research note by analyst Robert Drbul at Lehman Brothers. For the first quarter ended June 30, net income was $319 million versus $329 million in the same year-ago quarter.

Financial sources said Hilfiger has generated substantial interest among both financial and strategic players. Names whispered in the industry regarding strategic buyers include Jones Apparel Group, VF Corp. and Liz Claiborne, the typical players that routinely get named when a consumer brand is put on the auction block.

One name that has come up repeatedly is Li & Fung USA, which is changing its image from a sourcing powerhouse to a global branding model. A spokeswoman for Li & Fung said that "it is the company's policy not to comment on rumors."

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