Deal Is Near for the Sale of Hilfiger
Phillips-Van Heusen, the clothing conglomerate that owns Calvin Klein, is near a deal to buy Tommy Hilfiger, once a leading purveyor of colorful preppy clothing, for about 2.2 billion euros, or $3 billion, in cash and stock, people briefed on the matter said Sunday night.
Phillips-Van Heusen , which also owns Arrow and Izod and licenses brands like Geoffrey Beene and Kenneth Cole New York, is hoping to take advantage of Tommy Hilfiger’s strong European distribution channels for its own products, these people said. Despite Tommy Hilfiger’s reputation as a quintessentially American clothier, two-thirds of the company’s business is based in Europe.
A deal could be announced as soon as Monday morning, though these people warned that talks were continuing and a deal might not be reached.
Representatives for the two companies could not be reached for comment.
While Mr. Hilfiger no longer holds a management role at the company that bears his name, he remains a principal designer and a public face for the clothier.
If completed, the deal would be only the latest to emerge from an active market for mergers and acquisitions, as corporate buyers feel more confident in pursuing long-desired targets. A sale of Tommy Hilfiger would be a lucrative exit for its current owner, the British private equity firm Apax Partners. Apax has twice sought an initial public offering for the clothier, and Tommy Hilfiger’s chief executive, Fred Gehring, told Reuters in September that an I.P.O. was the most likely next step for the company.
Speculation had spread about a potential deal between the two companies over recent weeks, including in a report by Women’s Wear Daily. Shares of Phillips-Van Heusen have risen nearly 19 percent in the last month, closing on Friday at $47.74.
Under the proposed terms of the deal, Phillips-Van Heusen will pay a combination of cash and stock, though most of the offer would be in cash. Apax will own about 10 to 15 percent of the American clothing company. Phillips-Van Heusen is expected to take on a significant amount of debt as part of the transaction.
Phillips-Van Heusen management, led by Emanuel Chirico, will remain in New York, and Tommy Hilfiger’s will remain in Amsterdam.
A deal would provide yet another owner for Hilfiger, whose founder has weathered a series of ups and downs over the last two decades. Cashing in on the craze for his particular brand of prep — emblazoned with a stylized American flag — Mr. Hilfiger was among the first American designers to take his company public.
His clothing changed with the times, gaining popularity among rap stars as its proportions swelled to take advantage of trends in streetwear. The effect was a hipper Polo Ralph Lauren, with bigger jeans and baggier T-shirts.
But by the late 1990s Tommy Hilfiger became unfashionable, a victim of fickle customer tastes.
The company was eventually sold in 2006 to Apax and European management, led by Mr. Gehring, for about $1.6 billion in cash.
Under Apax and Mr. Gehring, Tommy Hilfiger has staged a big recovery. In 2007, it struck a deal with Macy’s that gave the department store giant exclusive sales rights for its clothing. Tommy Hilfiger also sells its clothing at its own branded stores and sells licensed products like fragrances elsewhere.
The company has also sought to reclaim its preppy heritage, slimming down its sizes and returning to an image of young American aristocrats at play. That has rejuvenated the company’s fortunes, first in Europe and then elsewhere.
The company shares some ties with Phillips-Van Heusen: the American conglomerate already owns a license to produce some Tommy Hilfiger clothing.