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Sanders owns 4.7 million shares of Nautica, both indirectly and directly, making his 13.5 percent stake worth $79.9 million. That includes 1.3 million share options that are exercisable on or before July 22.
VF has entered into a separate deal with Chu to acquire from him his rights to receive 50 percent of the net royalty income from licensing the Nautica trademark for $104 million over the course of four years. Under the agreement, VF will pay Chu $38 million upon the closing of the transaction and $33 million on each of the third and fourth anniversaries of the closing. Chu will also have the right to receive payments in each of the next five years in the event an annual gross royalty revenues threshold is exceeded.
Robert Shearer, chief financial officer of VF, told WWD it is yet to be determined what designer John Varvatos’s role will be in the new company. He doesn’t have a contract with VF either. Nautica has financed Varvatos’s men’s wear business since fall 2000. As reported, Varvatos plans to launch a women’s wear collection for fall 2004.
“He’s a real talented guy,” said Shearer, noting they will work will him over the next few months to determine what his role, if any, will be at the company and how his business fits within the portfolio.
As reported, Virginia Genereux, a research analyst at Merrill Lynch, said in a research note last month that in the event of a change of control and if Nautica’s Sanders is no longer employed by the company, the Varvatos brand must be spun off or sold; or John Varvatos may elect to either be paid 10 percent of the brand’s net income as long as he is ceo, or to receive a lump sum payment of two times the brand’s net income for three years (not to exceed $50 million.) Varvatos’s wholesale business, while still in its infancy, hasn’t been a real money-maker for Nautica.