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Article July 14, 1994

<CR><RD><BR><CS:BOLD>CALVIN IN PACT TO SELL CK JEANS<BR><BR>Byline: </CS>JANET OZZARD<BR><BR>NEW YORK -- Calvin Klein has finally firmed up a buyer for the CK jeans line.<BR>Klein signed a deal Wednesday with Rio Sportswear and Charter house Group...


CALVIN IN PACT TO SELL CK JEANS

Byline: JANET OZZARD

NEW YORK — Calvin Klein has finally firmed up a buyer for the CK jeans line.
Klein signed a deal Wednesday with Rio Sportswear and Charter house Group International Inc., an investment firm here, to sell the designer company’s CK Calvin Klein jeanswear business. The deal is valued at around $50 million, exclusive of ongoing royalties and such variables as inventory to be determined before closing, said Barry Schwartz, chairman of Calvin Klein.
Calvin Klein’s women’s and men’s jeanswear business is estimated to have sales around $100 million. Signing a deal for the jeanswear business is in line with company’s stated intent to focus on licensing and build image with its women’s collection. Klein’s key licenses include fragrance, men’s wear, underwear, footwear and eyewear.
Schwartz said the company will continue to run the design, advertising, promotion and shipping of the jeanswear out of the New York headquarters.
To manage the acquisition, Arnold Simon, chief executive officer of Rio, and Charterhouse have formed a new company, Calvin Klein Jeanswear Co., which holds the license for the women’s and men’s jeans and jeanswear collections, and will be responsible for sourcing and manufacturing. Simon will hold the ceo post.
Danny Gladstone, who has been president of the jeanswear division of Calvin Klein, will keep that post and will bean executive in the new company.
Under the agreement, the new company will have the rights to manufacture, market and sell the women’s and men’s jeans and jeanswear collections in the U.S. and other territories. It will also acquire Calvin Klein Inc.’s domestic jeanswear production facilities, including a factory and laundry in Nesquehoning, Pa., and a factory in Abbeville, S.C. Klein and the new company also plan to develop and launch a children’s jeans business.
The agreement ends a second round of negotiations for Rio and Klein, and months of deal-making and breaking. Klein and Rio’s first go-round, in February, fell apart after Simon was unable to come up with adequate finances for the acquisition.
Klein then went into talks with Fruit of the Loom, but that deal ended because FTL wanted to create a broader sportswear line, with knit and woven pieces, while Klein wanted to keep to a narrowly focused denim line.
Charterhouse, based here, manages over $550 million in equity funds in the middle market.
The deal is expected to be completed by the end of this month, pending federal approval, Schwartz said.