By  on March 14, 1994

NEW YORK -- Barry Schwartz, chairman of Calvin Klein Inc., denied Friday that the Klein-Rio Sportswear deal for CK jeans is in jeopardy, despite reports to the contrary.

"We spent an hour this morning with Arnie Simon [chief executive officer of Rio], and it's on track," said Schwartz.

In February, Calvin Klein Inc. and Rio Sportswear entered a letter of intent for Rio to buy the CK women's and men's jeans divisions for $35 million, plus ongoing royalty payments. Negotiations are expected to be completed by mid-March, and Rio is planning to assume production of the fall line.

But sources said Friday that Oshkosh B'Gosh, the Oshkosh, Wis.-based children's wear manufacturer, which has been negotiating since September to buy Rio, doesn't want to get involved in the Calvin Klein business at this time and is thwarting Rio's attempt to buy CK Jeans.

"Our Rio deal is not contingent on Oshkosh buying Rio," said Schwartz. Simon is said to be eager to do the Klein deal -- even without Oshkosh -- but is locked into the Oshkosh acquisition.

One source said that Oshkosh is a conservative firm and views Calvin Klein's jeans business as "too racy."

Furthermore, sources said that retailers who were here last week for market week were confused by what was presented at the CK showroom and the new direction the line was taking. Retail prices of CK Jeans, as planned under the Rio agreement, were reduced from $60 to $45.

Calvin Klein is currently manufacturing the fall line, but should a deal be consummated, Rio would take over production.

Douglas Hyde, president of Oshkosh, could not be reached for comment.

Schwartz said Klein's lawyer has been focusing his attention on closing the sale of Klein's underwear business to Warnaco -- expected to be finalized early this week -- and noted that the Rio deal should be completed in 30 days. Klein's attorney, Arthur Liman, was unavailable for comment Friday.

Simon denied reports that the Klein deal has hit a snag.

"Everything seems to be hunky-dory. We're very friendly, and we're talking in a positive mode. We're working on it," said Simon, contacted at Klein's offices. He said he couldn't comment on when a deal would be consummated with Oshkosh or Calvin Klein.CK women's and men's jeans generate roughly $80 million in sales, said sources. Under the deal, Rio is expected to acquire the assets of the jeans business, which include a laundering facility in Nesquehoning, Pa., and a sewing plant in Abbeville, S.C. Rio will also receive the license to manufacture and sell Calvin Klein jeans and jeans-related products.

Oshkosh is reeling from its own problems. Hit by a $7.1 million after-tax restructuring charge, Oshkosh posted a loss of $6.2 million in the fourth quarter ended Dec. 31. In the 1992 quarter, the children's wear giant showed a loss of $443,000. Sales rose 11.2 percent in the latest quarter to $80.5 million from $72.4 million.

For the year, earnings after the charge fell 70.1 percent to $4.5 million, from $15.1 million a year earlier. Sales dipped 1.7 percent to $340.2 million from $346.2 million.

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