By  on October 31, 2012

Steeped in fashion and financial lore, Warnaco Group Inc. has had a highly volatile and storied past — and a lot of it revolves around Calvin Klein.


Linda J. Wachner, a former foundations buyer at Macy’s Herald Square who served as Warnaco’s president, chairman and chief executive over a 15-year span, led a leveraged buyout with an investment group in 1986, wresting control of Warnaco away from existing management. Observers say the move was akin to those of other Nineties buyout specialists such as Henry Kravis, Saul Steinberg and Ronald Perelman.

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Wachner and her group paid 14 times cash flow — $500 million in borrowed money and a $200 million revolver for working capital — at a time when the going rate for that kind of deal was about six times cash flow. Warnaco went public in 1991 at $20 a share, effectively $10 a share based on a two-for-one stock split in 1994, the same year it completed the purchase of the business and trademarks of Calvin Klein Inc.’s men’s underwear and a license for the trademarks in Calvin Klein men’s accessories worldwide. By 1996, Wachner had taken Warnaco from a $425 million-a-year apparel smorgasbord to a sharply focused, branded apparel maker that generated sales of $1.06 billion. Wachner said the Calvin Klein name gave Warnaco a major entry into the men’s underwear business worldwide, while adding a strong designer name to the group’s core innerwear portfolio.

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