By  on December 23, 2005

NEW YORK — Private equity firm Apax Partners was said on Thursday to be in late-stage discussions to complete a deal to buy Tommy Hilfiger Corp., triggering a 2.2 percent drop in the stock and possibly a lower purchase price.

Banking sources familiar with the negotiations stated the financial firm is said to be willing to pay at least $16.50 a share, which, at 92.5 million outstanding shares, would mean a deal worth about $1.52 billion for the Hong Kong-based apparel retailer and manufacturer.

Hilfiger's role was unclear should the company be acquired. He is paid $14 million to $18 million a year.

Tommy executives declined comment. Apax representatives could not be reached.

The stock closed Thursday at $16 on the New York Stock Exchange, down 36 cents from the previous close and with more than 1.4 million shares traded. That compares with average trading volume of 517,992 shares. Tommy Hilfiger's market capitalization is $1.47 billion.

Bidders were looking at a price tag starting at $16 a share and were not expected to pay more than $17. Investors and some bankers last week thought the total purchase price might be about $1.68 billion. Tommy's market capitalization last week was $1.64 billion based on the stock's closing price of $17.75 on Dec. 13.

Shares of Tommy Hilfiger lost ground in the past week. A purchase price in the $1.52 billion range would still represent a slight premium over the company's market cap. The firm's prospects for its European and Asian businesses are considered excellent, but domestic wholesale sales are struggling even though U.S. retail operations are doing well.

Meanwhile, Phillips-Van Heusen, which had been a close partner to Apax in the bidding, is now said be taking a lower profile. PVH would have a licensing role in the deal, but not necessarily an equity stake as previously discussed. It wasn't immediately clear whether Fred Gehring, chief executive officer of Tommy Hilfiger Europe, still had a role in the bid that was submitted to Tommy Hilfiger's bankers at J.P. Morgan Chase & Co. late last week.

Gehring, working with Apax's London office, had submitted a bid for Tommy in June that was rejected. Tommy's bankers began contacting potential strategic buyers in the U.S. around July and August to gauge interest, as first reported on WWD's Web site on Aug. 17. WWD also was first to report on Nov. 10 that Apax was in the lead in the pursuit for Tommy Hilfiger. At the time it was working with Gehring and PVH, according to sources familiar with the negotiations.Should Apax and Tommy conclude a deal, Apax will own a stake in several high-profile apparel brands. Apax is the private equity firm that helped PVH acquire Calvin Klein, and also has invested in Spyder Active Sports. Its investment in PVH was $250 million.

Apax Partners' funds, with offices in New York and London, have raised about $20 billion around the world.

For the fiscal year ended March 31, Tommy Hilfiger's net income dropped 34.5 percent to $85.7 million, or 93 cents a share, from $130.8 million, or $1.43, a year ago. Total revenue fell to $1.78 billion from $1.87 billion in 2004.

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