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Warnaco Said Still in VF Sights

NEW YORK — Reports are resurfacing in the market that VF Corp. is in discussions to acquire bankrupt Warnaco Group, but the parties are remaining mum for the moment.<br><br>In a separate development, Linda Wachner, former chairman and chief...

NEW YORK — Reports are resurfacing in the market that VF Corp. is in discussions to acquire bankrupt Warnaco Group, but the parties are remaining mum for the moment.

In a separate development, Linda Wachner, former chairman and chief executive of Warnaco, filed additional court papers in which she appeared to change her version of the circumstances surrounding her separation from Warnaco in November 2001.

VF executives would not return phone calls for comment. A Warnaco spokesman, who didn’t address the issue, would only say, “The company will file its plan of reorganization at the end of the month and hopes to emerge as a stand-alone company.”

To be sure, Warnaco could still file its plan, due by Aug. 31, emerge from bankruptcy with its lenders as the new owners and announce shortly thereafter that it will be acquired by VF. However, bankruptcy sources said that the more likely scenario would be for a deal to occur before the filing of the plan, with VF in effect “funding” the plan of reorganization.

VF, according to vulture fund sources, has been in talks with Warnaco off and on since shortly before Warnaco’s June 2001 bankruptcy filing. Warnaco has also held preliminary discussions with other manufacturers about selling parts of its intimate apparel and swimwear operations. Two senior level executives at different firms said that the stumbling block in each of their discussions has been the high price that Warnaco has sought for its units.

Dollar signs were also an issue with other firms looking at the Calvin Klein jeanswear licensed operation, but even cash-rich firms appear reluctant to spend money for only the right to produce CK jeanswear until the current license expires in 2044.

The recent appointment of VF veteran John T. Wyatt as president of Warnaco’s intimate apparel group places at VF an executive qualified to combine the brands collectively held by VF and Warnaco. Wyatt joined Warnaco in 1997 after more than 23 years with VF, then left to join Saks Inc. as president of its Parisian unit in 1998.

While antitrust conflicts haven’t been a factor in the apparel industry recently, an acquisition of Warnaco by VF could raise concerns about VF dominating the intimate apparel and denim markets.

This story first appeared in the August 9, 2002 issue of WWD.  Subscribe Today.

In intimate apparel, VF owns the VF, Vassarette and Bestform labels. An acquisition of Warnaco also would give it Olga and Warner’s, and of course Calvin Klein Intimates. In contrast Sara Lee Corp. manufactures under the Bali, Playtex and Hanes labels. In the denim category, VF already produces Wrangler and Lee’s jeans, but would take on a substantial presence in the upscale denim market if it could land the Calvin Klein license.

On the legal front, a hearing date has yet to be set in bankruptcy court regarding Wachner’s claim for $25.1 million in severance payment against her former employer, but Wachner, in a departure from statements made at the time of her Warnaco exit, is now telling the court that she was terminated without cause.

Court documents filed last week on Wachner’s behalf said that she was “unable to work out an ongoing employment arrangement satisfactory to the banks, and she was ultimately made the scapegoat for Warnaco’s business difficulties when her employment was terminated without cause on Nov. 16, 2001, just as work was completed on the 2002 business plan that was presented to Warnaco’s creditors a few days later.”

At the time of her departure from Warnaco’s ceo post, Wachner told WWD, “I couldn’t accept the contract that was offered to me by the company. It was too restrictive. As it stands now, I do not have to worry about non-compete or whether or not I want to offer anyone a job.”

The new documents also asserted that “the inherent injury of being discharged from a high-profile position that Mrs. Wachner had held for 15 years has been compounded by the [pre-petition bank lenders’ and the unsecured creditors committee’s] regrettable attempt to denigrate her contributions and reputation, including through the public misrepresentation of Warnaco’s financial performance under her leadership.”

Wachner’s court documents also said that the 2002 business plan “appears to be the basis for a soon-to-be filed stand-alone plan of reorganization that will likely give the banks ownership of Warnaco,” even though the plan was developed before Wachner’s termination.

As a director, Wachner has input on the reorganization plan and currently retains the right to vote on it. Sources said that the board has not asked Wachner to recuse herself from voting on such a plan, even though she still has the outstanding claim against the firm. Wachner, through her spokesman, declined comment on whether she would voluntarily consider recusing herself.

In intimate apparel, VF owns the VF, Vassarette and Bestform labels. An acquisition of Warnaco also would give it Olga and Warner’s, and of course Calvin Klein Intimates. In contrast Sara Lee Corp. manufactures under the Bali, Playtex and Hanes labels. In the denim category, VF already produces Wrangler and Lee’s jeans, but would take on a substantial presence in the upscale denim market if it could land the Calvin Klein license.

On the legal front, a hearing date has yet to be set in bankruptcy court regarding Wachner’s claim for $25.1 million in severance payment against her former employer, but Wachner, in a departure from statements made at the time of her Warnaco exit, is now telling the court that she was terminated without cause.

Court documents filed last week on Wachner’s behalf said that she was “unable to work out an ongoing employment arrangement satisfactory to the banks, and she was ultimately made the scapegoat for Warnaco’s business difficulties when her employment was terminated without cause on Nov. 16, 2001, just as work was completed on the 2002 business plan that was presented to Warnaco’s creditors a few days later.”

At the time of her departure from Warnaco’s ceo post, Wachner told WWD, “I couldn’t accept the contract that was offered to me by the company. It was too restrictive. As it stands now, I do not have to worry about non-compete or whether or not I want to offer anyone a job.”

The new documents also asserted that “the inherent injury of being discharged from a high-profile position that Mrs. Wachner had held for 15 years has been compounded by the [pre-petition bank lenders’ and the unsecured creditors committee’s] regrettable attempt to denigrate her contributions and reputation, including through the public misrepresentation of Warnaco’s financial performance under her leadership.”

Wachner’s court documents also said that the 2002 business plan “appears to be the basis for a soon-to-be filed stand-alone plan of reorganization that will likely give the banks ownership of Warnaco,” even though the plan was developed before Wachner’s termination.

As a director, Wachner has input on the reorganization plan and currently retains the right to vote on it. Sources said that the board has not asked Wachner to recuse herself from voting on such a plan, even though she still has the outstanding claim against the firm. Wachner, through her spokesman, declined comment on whether she would voluntarily consider recusing herself.