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Investors Drive Up PVH, Warnaco on Deal Speculation

Potential cost savings might make the long-rumored deal more appealing now.

Investors are keen on the idea of having the Calvin Klein business under one roof and pushed up shares of both the brand’s owner, PVH Corp., and its largest licensee, The Warnaco Group Inc., on speculation that the time for a merger of the two firms was approaching.

This story first appeared in the July 15, 2011 issue of WWD.  Subscribe Today.

PVH’s stock set a new 52-week high of $73.31 Thursday before settling at $72.70, up 3.3 percent for the day. Warnaco gained 1.8 percent to $55.04 in what was generally a down day for the market.

Emanuel Chirico, PVH’s chief executive officer, has noted the company is eyeing acquisitions now that the integration of Tommy Hilfiger is well under way. On Monday, Wells Fargo analyst Evren Kopelman noted that a PVH acquisition of Warnaco would help it challenge VF Corp., which currently weighs in as the world’s largest apparel company.

The combination of the two companies has long been talked about in the industry, but Kenneth Stumphauzer, analyst at Sterne Agee, said a deal makes more sense now that PVH owns Hilfiger.

“PVH was primarily a domestic company [before the Hilfiger deal] and Warnaco was more of an international company and so your infrastructure overlaps — which is where you get all your cost synergies from — were not as significant as you would like to see,” Stumphauzer said.

And PVH might have an advantage over other potential Warnaco bidders. Stumphauzer said the Calvin Klein jeans license likely has a change of control provision that might allow PVH to take the lucrative business back if someone else took over Warnaco.

A Warnaco spokeswoman declined to comment and PVH could not be reached.