By  on November 2, 2005

NEW YORK — First-round bids for Tommy Hilfiger were due last week, and Wal-Mart was not among the bidders.

According to financial sources, several financial firms submitted offers. At least one source close to the process said Wal-Mart Stores Inc. didn't bid. Bankers at J.P. Morgan Chase, which represents Hilfiger, declined comment.

A source close to the Hilfiger sale process said there is no official timetable to sell the apparel firm. The expectation is that a financial firm, which has other investments in the apparel sector, will have the "most success" in investing in opportunities such as Tommy, the contact said.

Apax Partners is said to be eyeing Hilfiger. Apax is the private equity firm that helped Phillips-Van Heusen acquire Calvin Klein. Apax also made an investment in Spyder Active Sports, which was deemed a success by industry sources. An Apax spokeswoman declined comment.

Analysts familiar with the credit markets said a leveraged buyout of Hilfiger was unlikely. "The LBO was in vogue when Neiman [Marcus] was sold because the financing market was still accessible. But now it's gotten much tougher. What you'll see is a sale possibly around $14 to $15 a share for Tommy, but not the $18 or $19 a share or even higher that you can get in an LBO," one analyst said.

Shares of Hilfiger closed up 2.7 percent on Tuesday to $16.53.

About a month ago, Wal-Mart hired consultants to help it conduct due diligence and evaluate a possible run for Hilfiger. Press reports had individuals close to the discounter acknowledging it was looking at Tommy. However, according to the financial source familiar with the sale process, "Wal-Mart is not part of the process, nor has it received any information and there is zero chance that they are going to buy Tommy."

But other financial and market sources told WWD that the world's largest retailer had contacted the apparel firm directly, bypassing J.P. Morgan Chase, and that discussions between Wal-Mart and J.P. Morgan did not take place.

Talks between Wal-Mart and Hilfiger, according to financial sources, included the disclosure of certain information such as financial data. According to sources, Wal-Mart was still evaluating Hilfiger's business through the end of October.A spokeswoman for Hilfiger declined comment, while a spokeswoman for Wal-Mart did not return calls for comment by press time.

"Wal-Mart's purchase of Tommy makes no sense. If that happens, Federated Department Stores [which sells Tommy] will not buy [the brand], or it won't buy as much, because it's not going to help its biggest threat build its apparel business," said Triangle Capital's Richard Kestenbaum, a banker whose specialty is in the apparel industry.

Robin Lewis, an industry consultant, said, "If it isn't a Tommy acquisition, Wal-Mart's going to have to seek higher-margin ground in other upmarket or designer brands ... It's obvious they understand the need strategically because of their recent organizational moves and their launch of the Metro7 sportswear brand. The $64,000 question is: Can they execute that strategy?"

Wall Street analysts also cite multiple changes at the management level recently as one factor that has overshadowed any acquisition priority at the discounter. One of the changes involved an individual who had been working on an analysis of the Tommy business, and now is no longer involved in the project, according to a source.

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