Tommy Hilfiger Corp., which has been owned for nearly four years by private equity firm Apax Partners, could be in play.
According to sources, Apax has been talking to companies to gauge their interest in acquiring Hilfiger, while at the same time continuing to explore an initial public offering for the American brand, which was postponed two years ago when global stock markets began to slide.
At the moment, the lead candidate to acquire Hilfiger is said to be $2.4 billion Phillips-Van Heusen Corp., which has been openly on the prowl for acquisitions and proved with its 2002 purchase of Calvin Klein that it can successfully incorporate a large global brand into its business.
Both Fred Gehring, chief executive officer of Hilfiger, and Christian Stahl, partner at Apax, had no comment. Michael Shaffer, executive vice president and chief financial officer at PVH, didn’t return a phone call seeking comment.
A deal with Hilfiger would give PVH not only the name, but an international network of retail stores; multiple categories of women’s, men’s and children’s businesses; an exclusive deal with Macy’s, and a strong foothold in the European and Asian markets. PVH already makes Hilfiger’s dress shirts and neckwear under license.
Given Hilfiger’s deal with Macy’s, observers said it was the firm’s international operations that were likely sparking interest. Hilfiger merchandise is sold throughout Europe, Asia and Central and South America, and the company has 950 stores, about half of which it owns and operates. Earnings before interest, taxes, depreciation and amortization tallied 270 million euros, or $383.4 million, for the year ended March 31, 2009. Sales were 1.6 billion euros, or $2.27 billion at average exchange.
But buying Hilfiger could be a bit of a stretch for PVH, which has about $480 million in cash on hand. Sources said one option for PVH could be to structure a deal that resembled its acquisition of Calvin Klein, in which PVH used funds from Apax as well as some of its own money to buy the business. Apax then received a stake in PVH, which the equity firm sold when it bought Hilfiger in 2006.
Apax owns 80 percent of Hilfiger and wanted to cash out its stake in October 2007, exploring an offering on the Euronext stock exchange. That float was postponed indefinitely in early 2008 because of market volatility. Now, sources said, Apax is looking again at an IPO for Hilfiger, or an outright sale. One question is, if Apax does do an IPO, where the offering would take place. For example, the environment for IPOs in London — Europe’s biggest stock exchange — is uncertain.
Two weeks ago, the fast-fashion retailer New Look — owned by Apax and Permira — postponed plans for an IPO just a few days after saying it was going to float on the London Stock Exchange in early April. However, Supergroup, the U.K. retailer that owns the seven-year-old streetwear label Superdry, recently laid out plans to go public.
“Supergroup’s performance will be a pointer to investor sentiment,” said Nick Bubb, retail analyst at Arden Partners in London. “Investors are looking for attractive situations and paying for unique companies. There are also some signs that private equity is looking to buy — but it still remains to be seen what those companies will do.”
Apax also had better luck with the 500-door specialty chain Rue21, which went public on Nasdaq last year and is in the midst of a secondary offering.
Debt is an issue on the IPO front, with fund managers wanting to know how much money from the IPO will go toward repaying debt versus how much will go to the private equity partners.
Investment funds typically buy companies with the plan to hold them for a few years, perhaps while restructuring operations, and then sell off the hopefully leaner and meaner firm at a profit.
But the bullish market for consumer-oriented companies faded with the financial crisis, and now funds appear to be looking for ways to cash out. WWD.com reported Sunday Permira was shopping around its stake in Proenza Schouler and perhaps Valentino, although Permira’s ceo denied this.
The lackluster IPO market combined with retailers’ growing desire to secure exclusive brands could lead to a round of dealmaking where funds sell their brands to stores, said Sherif Mityas, a partner in A.T. Kearney’s retail consulting practice.
Although private equity firms typically have “patient” investors, Mityas noted some fund managers are willing to take “acceptable losses” on their fashion investments in order to pour money into areas such as solar, nuclear and wind power.
“The severity of the bottleneck in capital is really forcing a number of these major funds to look internally and say, ‘How can I get my own money by unloading some of the investments I already have in my portfolio?’” Mityas said. “Where these guys are looking for 20, 30, 40 percent growth rates for a return, this is not coming from a consumer business right now.”
Further strengthening the argument in favor of a Hilfiger IPO rather than an outright sale is skepticism about whether it would make sense for a strategic buyer to purchase the brand.
“This is really a sizeable transaction,” said Allen Ellinger, senior managing partner at Marketing Management Group, speaking generally about a Hilfiger acquisition. “There aren’t too many people who could do this.”
He said it could ultimately come down to another private equity firm buying the brand, or an IPO.
Ellinger also questioned why Apax would rush to sell Hilfiger, given its profits. “At this level of profitability, why bother selling it?” he asked. “They’ve done a wonderful job of repositioning the brand.”
Andrew Jassin, managing director of Jassin Consulting, observed, “They’ll talk to everybody, but from my perspective, an IPO makes a lot more sense. Tommy Hilfiger, the brand, has achieved a lot of goals that make it a global brand. Their outlet presence is pretty strong in the U.S., the deal they have with Macy’s seems to be working really well. That’s the right model.”
Another buyer for Hilfiger might also emerge, though few have the resources necessary to close the deal.
Li & Fung Ltd. does all the sourcing for Hilfiger and has a $1 billion cash stockpile to spend on acquisitions, but president Bruce Rockowitz suggested an acquisition would not be in keeping with his firm’s current three-year business plan.
“In this three-year plan, it’s not the type of deal we are looking at,” Rockowitz said. “It’s a very big bet on a brand, and if you look at our history, we have been licensing brands and really haven’t been buying brands.”
But with just a year left under the current business plan, a deal that didn’t conform with Li & Fung’s past practices is not out of the cards.
“We do something that’s transformational every three years,” Rockowitz said. “I’d say just, ‘Watch the space.’”
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye