NEW YORK — After walking away from Lauren by Ralph Lauren, Jones Apparel Group appears to have its eye on buying Anne Klein.
Sources said Jones’ interest in the Anne Klein franchise has heated up this week and the company might soon up the bidding in the pursuit of the label’s parent company, Kasper ASL, which has been exploring various strategic options as part of its plan to emerge from bankruptcy protection in the coming weeks.
Kellwood Co. was believed to be the leading contender for Kasper, but with its launch of an Izod women’s collection this week through a license with Phillips-Van Heusen and what could be a another deal to license Calvin Klein’s CK women’s collection from PVH any day, a concurrent deal for Kasper might be out of Kellwood’s reach.
So many trophy brands are looking for deals right now — a Kasper sale, a CK license, reports of talks between Oscar de la Renta and J.C. Penney, plus interest in better collections for Marc Jacobs and Michael Kors — that the usual suspects for such transactions have their hands full sorting out the most lucrative moves. Kellwood, Jones, Liz Claiborne Inc. and the relatively new dealers, Lawrence Stroll and Silas Chou, have cropped up with interest in nearly every case as the designer industry makes a big play for perceived opportunities in the better and moderate markets.
Jones’ decision this month to sue Polo Ralph Lauren, which then countersued, has suddenly opened up about $548 million worth of business that virtually every player is after, including Jones with its own lifestyle brand, the Lauren by Ralph Lauren line being developed in-house by Polo and the upcoming incarnation of CK.
Yet another brand with momentum in the better market is AK Anne Klein, the lower-priced counterpart to the bridge line, Anne Klein, and which already has a significant presence in department stores.
The financial crisis that forced its parent firm, Kasper, into a prepackaged bankruptcy in February 2002 has turned into what some buyers consider a golden opportunity now that its financials have turned around. In its most recent quarterly report in May, Kasper posted a first-quarter profit of $8 million on sales of $104.9 million, including $4.4 million in licensing revenues.
Since its committee of creditors will likely consider the highest bid for the company in the end, sources said Jones chief executive officer Peter Boneparth is planning to up the ante with an offer in the neighborhood of $150 million. Even if other interested parties, like Kellwood, countered with a bidding war, Jones has the cash — and a history of big spending on acquisitions like Nine West — to emerge as the winner. Boneparth had no comment on Wednesday.
However, talk of a possible Jones bid for Kasper was fueled Wednesday when Jones reported it has obtained a $700 million three-year revolving bank credit facility that extends to June 10, 2006. Combined with the company’s extant $700 million revolving credit facility, which lasts until June 15, 2004, Jones now has $1.4 billion of committed bank credit, the company said in a statement. Jones said the credit line will primarily be used for working capital, letters of credit and other general corporate purposes.
“Jones acquiring Kasper is very realistic,” said David Campbell, an analyst with Davenport & Co. “Kasper is a strong player in the suit business and Jones is strong in casual apparel, so it would be a good fit.”
John Idol, ceo of Kasper for nearly two years, also declined to comment on a possible Jones bid. The original bankruptcy filing called for Kasper to emerge with the issuance of new stock as the Anne Klein Group, but the outlook for its exit changed last December when Idol and a team of Kasper management made an offer to buy the group for about $88 million, which they subsequently raised to around $100 million, representing about a quarter of Kasper’s overall annual sales. The Anne Klein collections alone are estimated to generate $100 million in sales and an additional $300 million through licenses.
However, the management offer was not enough to impress a special committee of Kasper’s creditors, who then hired Peter J. Solomon Co. as a financial adviser. Two months ago, the committee suggested that a decision would take about 60 days, but the latest developments could extend its considerations.
Even though Kellwood has its share of projects on the table, the company remains strongly interested in Kasper, sources said, although company officials declined to comment on the talks.
Stephen L. Ruzow, president of Kellwood women’s wear, said the intense interest in moderate and better brands stems from a continuing trend of trading down in consumer spending habits on apparel.
“When business is bad, it’s a very good time to look at new opportunities,” he said. “It’s important to focus on voids in the marketplace. With Izod [launching in the women’s moderate market for spring], we identified a niche where the department we’re targeting is 90 percent bottoms. We felt there was a need in that area for a very strong tops presentation, which is where we’ve focused this presentation. It’s a modern look but a misses’ fit, and we think the consumer is going to react very strongly to that product. We feel a lot of consumer dollars are going to come from non-moderate resources.”
Anne Klein’s stint in bankruptcy stems from the last sale of the brand in March 1999, when Kasper bought it for around $75 million after months of negotiations. But the debt incurred by the transaction — more than $110 million, according to the company — eventually forced a management shuffle that pushed out company founder and ceo Arthur S. Levine, when Idol was brought in as a turnaround specialist.