Tommy Talks Escalate, With Jones and VF Said To Be Suitors

While Tommy Hilfiger hasn’t hung out a “For Sale” sign, sources say vigorous discussions might be going on with Jones Apparel Group and VF...

NEW YORK — While Tommy Hilfiger Corp. hasn’t officially hung out a "For Sale" sign, sources indicate there appear to be some vigorous discussions going on with suitors Jones Apparel Group and VF Corp.

Faced with a slowdown in sales, particularly in the core men’s area, and management shifts, Hilfiger, the $1.8 billion apparel firm, is reportedly weighing various alternatives that may include a sale to a larger apparel conglomerate.

Hal Reiter, president of Herbert Mines Associates, the executive search firm, said he’s still conducting the ceo search for Hilfiger, although one source thought the search was put on hiatus. Last year, Joel Horowitz, chairman and ceo of Hilfiger, announced he would step down when his contract expires in March 2004. He was unavailable for comment Thursday.

Tommy Hilfiger’s stock closed Thursday at $7.93, down 3.5 percent or 29 cents on the New York Stock Exchange. Hilfiger’s current market capitalization is $718.3 million, off from its peak of over $3.5 billion.

Sources said they don’t believe there’s a formal book out on Hilfiger, but indicated the company is "clearly in play" and if there’s an alternative that the board finds attractive, it will seriously be considered.

Hilfiger is seen as particularly vulnerable to a takeover because as of Dec. 31, 2002, it is sitting on $485.6 million in cash and cash equivalents. For the past three years, it has experienced declining sales in its men’s wear business. It has also been working to pare down its debt. For the third quarter ended Dec. 31, 2002, Hilfiger’s long-term debt was $350.2 million, down from $600.4 million. Further, Hilfiger’s cochairmen Lawrence Stroll and Silas Chou both stepped down last year to pursue other business opportunities.

From 1989 (when Stroll and Chou bought the company and its license agreements from Murjani International) to 1999, Hilfiger’s business experienced high-flying momentum as the company launched a slew of products and categories. Since 1999, Hilfiger has called its men’s wear "a mature business," and has relied on its women’s lines and international sales for growth.

Market observers believe VF, which last year generated $5.08 billion in sales, would be a strong candidate to buy Hilfiger, "if the price were right." Last year, VF was beat out by Phillips-Van Heusen in a bid for Calvin Klein. One source said Hilfiger would make a lot of sense for VF since it’s in the jeans business and is a volume commodity player. "Tommy is a little more upscale, but it’s not getting into the luxury category," he said.
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