The deal confirms a report that first appeared in a front-page story in WWD on June 24.
For VF, a $5.7 billion company that lost out in its attempt to buy Calvin Klein Inc. in December, a Nautica acquisition enhances its portfolio by adding two upscale denim brands, Nautica Jeans and Earl Jean, boosting its presence in department and specialty stores and providing it with a leading brand in the men’s sportswear category. In addition to leveraging VF’s jeanswear expertise, Nautica is expected to benefit from VF’s supply chain capabilities, sourcing, and inventory and brand management.
The deal is the most recent in a string of acquisitions of high profile apparel brands in the last seven months, including Phillips -Van Heusen’s acquisition of Calvin Klein Inc.; Lawrence Stroll and Silas Chou’s purchase of Michael Kors LLC; Oxford Industries’ purchase of Tommy Bahama; Liz Claiborne’s acquisition of Juicy Couture, and Kellwood’s bid last month for Kasper ASL, which is still pending and has subsequent competition from firms such as Jones and Claiborne.
It also raises the question of what’s left to buy, given that everyone from Tommy Hilfiger to Jones has admitted they remain on the prowl for acquisitions to deliver topline growth.
VF is expected to pay Nautica shareholders $17 per share in cash. The company will also pay approximately $14.6 million, net of tax, to cash out employee stock options for a total consideration of approximately $585.6 million. The transaction, expected to close at the start of the fourth quarter of 2003, could add 10 cents to VF’s earnings per share in 2004. The acquisition of Nautica can be terminated by either company if not completed by Feb. 7, 2004, with VF in line to receive an $18 million breakup fee, according to filings with the Securities and Exchange Commission.
News of the sale drove shares of Nautica up a hefty $3.59, or 27.2 percent, to close at $16.78 in Nasdaq trading Monday. VF’s stock also rose, picking up $1.55, or 4.6 percent, to end the day at $35.59 on the New York Stock Exchange. The proposed combination was instrumental in driving share prices up throughout the apparel and retail sectors. [See related story page 2.]