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Allan Ellinger, senior managing director of Marketing Management Group, a consulting firm said, “It sounds like a great deal for everybody. VF is certainly the most logical buyer at the moment. They have the most to gain without cannibalizing any existing businesses, and it gives shareholders of Nautica a graceful exit.”
Manny Weintraub, head of the consulting firm that bears his name, observed, “As a strategic move, I think it sends a signal to Wall Street. VF is buying a designer company without a designer name. I wouldn’t say David Chu is the darling of the fashion press, but they know who he is. Who in VF is its key designer? VF is a superior company doing everything well, but without anyone stepping out as the head designer. The acquisition is a signal by VF that it is not a sleeping giant, as well as a message to Wall Street to keep an eye on its stock because it will be doing things. The addition of David Chu is a signal that it is becoming more edgy, but not too edgy.”
VF said it will finance the acquisition initially through available cash and short-term borrowings. The company anticipates that with any required borrowings the resulting ratio of debt to total capital would remain below VF’s long-term target of 40 percent. The financial adviser to VF was Citigroup Global Markets Inc.
The boards of directors of both firms have approved the merger. The merger is subject to Nautica shareholder approval, receipt of customary government approvals and other customary conditions. In connection with the deal, VF has obtained commitments from Sanders and Chu to vote all Nautica shares owned by them in favor of the merger, representing a total of approximately 10 percent of the current shares outstanding.
The Navigation of Nautica
1983 David Chu launches Nautica.
1984 State-O-Maine Inc., a public company, acquires Nautica.
1993 State-O-Maine changes its name to Nautica Enterprises.