NEW YORK — Canadian Peter Nygard and Tarrant Apparel Group of Los Angeles have converged south of the Rio Grande for a Mexican rendezvous.
Nygard, chairman and chief executive officer of Nygard International, has acquired 6.4 percent of Tarrant through his investment vehicle Emerald Point Inc., based in the Bahamas. The enterpreneur characterized the purchase as “a private investment in a public company that’s indicative of my long-term commitment to Mexico.”
According to a Form 13-D filed with the Securities and Exchange Commission, Emerald Point acquired 1,019,093 shares of Tarrant, or 6.4 percent of its outstanding common stock, for about $5.2 million during a six-month period ending June 4.
Completing a vertical integration process, Tarrant this month said that it had reached an agreement in principle to purchase the Mexican twill mill, which it commissioned in the late Nineties, from Trans Textil International and Inmobiliaria Cuadros.
Both privately and through Nygard International, Nygard said he has made a series of what he called “value-added investments” in Mexican production facilities, helping to compensate for the scaling back of Nygard-owned plants in Canada to two from seven several years ago.
“We have a number of exclusive arrangements and controlling interests, including joint ventures, in Mexican plants,” he told WWD. “There have been problems with reliability out of Mexico, but it’s here to stay and we want to be involved in seeing that things begin to work properly. To get it done in Mexico, you have to be directly involved.”
Although his firm currently has no work on order through Tarrant’s Mexican facilities, Nygard said that he had no doubt that its operations there would prove to be “viable.”
As reported, in the second quarter ended June 30, Tarrant’s net income dropped 23.7 percent from the comparable year-ago period to $1.3 million, or 8 cents a share, as sales declined 0.9 percent to $95.3 million.
The SEC document states that Nygard’s stock purchases were for investment purposes but, in the standard jargon employed in such papers, points out that the acquiring party “may in the future pursue a further investment and involvement in the company including, but not limited to, a possible merger or combination involving a portion of the reporting person’s business.”
Gerard Guez, chairman and ceo of Tarrant, told WWD that his firm and Nygard had no previous business relationship and that neither he nor other officers of Tarrant had been in contact with Nygard since the stock transactions.
As reported, Nygard International recently expanded its U.S. distribution center, in Gardena, Calif., and is hoping to establish a $400 million U.S. business. The company projects $500 million in worldwide sales by the end of this year, about half of that coming from the U.S. The firm produces under the labels Peter Nygard Signature, Bianca Nygard, Nygard Collection and Lia.
“We flattened out a bit last year, along with everyone else, but we’re coming back well,” Nygard said.
About a quarter of Nygard’s volume comes from private label sales, and the ceo cited the ability to provide “customized design, differentiation and exclusivity” for some of its success with accounts including Dillard’s, J.C. Penney Co. and Kohl’s Corp.
Nygard operates about 400 stores in Canada, but has no plans for a rollout of stores in the U.S., Nygard said in June.
Tarrant said the price tag for the Tlaxcala, Mexico, twill mill consists of 3 million new shares of the firm’s common stock, a 25 percent equity stake in its wholly owned Tarrant Mexico subsidiary, the cancellation of certain notes and accounts receivable and about $4 million in cash. Slated for completion before the close of 2002, the sale is contingent on due diligence and approval from the Mexican government.
In late 1998, Tarrant commissioned Trans Textil to construct and develop the plant, then leased and sold the firm’s manufacturing equipment to get it running and secured a production agreement for first right to its annual capacity of 18 million yards.
The production agreement included the option for Tarrant to purchase the facility and cancel the agreement.
“In 1997, we commenced the vertical integration of our business in Mexico in order to reduce product cost, allow us to better control production variances and to make us more competitive,” Guez said in a statement. The mill’s purchase marks the completion of that strategy.
He said Tarrant “will now benefit from eliminating some staffing redundancy, and most importantly, by capturing the profit from fabric production.”