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Polo to Buy Japan Licensee

Polo Ralph Lauren Corp. has struck another deal in its quest for further global growth.

NEW YORK — Polo Ralph Lauren Corp. has struck another deal in its quest for further global growth.

On Friday, Polo disclosed intentions to take its Japanese business in-house by buying back the master license and sublicenses. The company plans to purchase the remaining 50 percent interest in its Japanese master licensee, Polo Ralph Lauren Japan, from Onward Kashiyama and others, for approximately $23 million, as well as 80 percent of the outstanding shares of Impact 21 Co., its Japanese sub-licensee for women’s, men’s and jeans apparel and accessories, for approximately $22 per share.

In recent years, buying back licenses has been a successful strategy for the brand to better control the quality, distribution, image and growth of the company as a whole. It has already bought back licenses for footwear, Polo Jeans, Lauren by Ralph Lauren and its European business. The newest move would make Polo Ralph Lauren Japan a fully owned subsidiary of Polo, giving the New York fashion brand complete control over all aspects of its Japanese business.

“Japan is already the number-two sales market in the world for our brand,” Ralph Lauren, Polo’s chairman and chief executive officer, said on Friday. “We are committed to the market, the Japanese customer, and we believe this is an opportunity to enhance our business and brand position there.

“This transaction is consistent with our strategy of taking direct control of our brands when we feel there is a compelling growth opportunity for the company.”

The tender offer for Impact 21’s outstanding shares will start Tuesday, and the process will be open through May 21. According to a Polo statement, the transactions have a total value of $370 million, with a net amount of funding totaling about $150 million.

“It represents the most significant and complex transaction we have undertaken,” Roger Farah, president and chief operating officer, said in a conference call from Japan. “It’s a continuation of our long-term strategy of elevating and reinforcing the brand’s luxury image on a global basis. It’s also consistent with our desire to accelerate the growth of our international businesses. We believe that having direct control of our business in this market is necessary for the appropriate growth of the brand. And it will enable us to better align this important country with our global luxury image and strategies.”

This story first appeared in the April 16, 2007 issue of WWD.  Subscribe Today.

Lauren added that the deal would allow the company to advance its business and brand position in Japan “by opening new channels, leveraging our operational expertise, elevating visibility and, by extension, enhancing the overall corporate value.”

Polo entered the Japanese apparel scene in 1978, when it inked a master license deal with Seibu Department Stores, which owned 100 percent of the master license and controlled a series of sub-licensees that distributed the Polo Ralph Lauren brand to department stores in Japan. In 2003, Polo bought a 50 percent controlling interest in its master licensee, Polo Ralph Lauren Japan, and the operation became a Polo-consolidated, 50 percent-owned joint venture with Onward Kashiyama.

In Japan, Lauren is still largely known for his basics assortment, from Polo and Oxford shirts to chinos. The 18,000-square-foot flagship that opened in Tokyo’s Omotesando district last year presented the designer’s enhanced lifestyle to the market for the first time. It offers Collection, Purple Label, Black Label, Blue Label and Double RL, as well as accessories, books and home accessories.

“The Japanese customer has responded very well to our offering and the store has already begun to elevate the brand’s image in the market,” Farah said on the call. “Following the successful completions of these transactions, we will begin to execute on our long-term initiatives that are consistent with how we operate our businesses worldwide. We will elevate the brand through product assortment and presentations, and support our luxury positions around the world. We will refine our distribution in key locations. We will also look to selectively expand our portfolio of Ralph Lauren stores that best showcase Ralph’s vision.”

Farah conceded the last two years of business in Japan were inconsistent with Polo’s overall international businesses by being “relatively flat.” Polo’s volume is roughly $450 million in Japan.

“The business here is not inconsistent with where Europe was when we bought it back in 2000,” Farah explained. “It’s been built around men’s sportswear and the appropriate women’s products.”

Moves like this allow Polo to steer the growth of its individual divisions. Case in point: the footwear license, which it bought back from Reebok International for $110 million in cash in 2005.

In related news, Polo last week said it had tapped Jerome Espinos as president of footwear for Collection and Purple Label, a new post. Espinos joins from LVMH Moët Hennessy Louis Vuitton’s Rossimoda footwear division, of which he was president. At Rossimoda, he was in charge of development and commercial sales of footwear for such LVMH brands as Marc by Marc Jacobs, Celine, Givenchy, Emilio Pucci, Kenzo, Donna Karan and Loewe.

At Polo, his areas of responsibility include sales, merchandising and planning for Collection and Purple Label footwear. Espinos will work closely with design, development, production and finance. He’ll be based in New York and report to Jacki Nemerov, executive vice president of wholesale brands, licensing and manufacturing.