NEW YORK — It’s unlikely that anyone anywhere had a better vantage point than Peter J. Solomon as last month’s acquisition negotiations between Calvin Klein Inc. and Phillips-Van Heusen Corp. neared completion.
This story first appeared in the January 6, 2003 issue of WWD. Subscribe Today.
Solomon, chairman of the investment bank that bears his name, has advised PVH for two decades and has been a PVH director for the better part of that time. He helped steer the company toward a number of deals it elected to go ahead with (such as the acquisitions of Izod and Gant) and quite a few that it passed on. In 2002, it represented Lands’ End in its sale to Sears, Roebuck & Co. and is currently involved in investment projects for companies including The Warnaco Group, Delia’s and, most recently, Kasper ASL.
“We’ve been looking for a deal for PVH for years and have considered dozens of them in the past,” he told WWD.
When PVH started to look into the possibility of acquiring all or parts of Warnaco, however, Solomon had a problem not uncommon in investment circles: conflict of interest. Peter J. Solomon Co. originally represented Warnaco’s bankers following the manufacturer’s June 2001 bankruptcy filing, but, Solomon noted, “had migrated toward representing the company itself with Bear, Stearns about six months ago. We couldn’t represent PVH at that time, although I’d tried to interest them in either Warnaco or Calvin Klein jeans.”
In fact, the banks, unsecured creditors, the U.S. trustee and Warnaco itself were willing to clear PJS to work with PVH on the CKI deal, but Warnaco declined to sign a waiver to that effect.
“The way I run my business, I can’t afford to go forward in that fashion,” Solomon said.
Instead, he observed the happenings from the sidelines until September, when PVH decided to stop pursuing Warnaco’s Calvin Klein jeans operation and focus instead on Calvin Klein’s company. Such a separation, according to numerous market sources, never took place at VF Corp., which, until the very end, waged a bilateral battle to acquire CKI and Klein’s jeans and underwear businesses at Warnaco. VF consistently has declined to comment on its acquisition negotiations.
In conversations with PVH chief executive Bruce Klatsky, Solomon lauded the idea of a CKI acquisition. However, he warned the PVH ceo that, as important as the price tag would be in the battle for Klein’s trust, more importantly is “proving to Calvin that you’re the type of person that he can rely on.”
Klatsky added his name to the upper echelon of the fashion industry when he succeeded in demonstrating to Klein that PVH would provide a suitable home for Klein’s empire of design and marketing activities, trademarks and licensing agreements.
Solomon gives Klatsky credit not only for “doing a great job of wooing Calvin,” but also applauds the entire PVH operation for “a great job on due diligence, and on the brand and all sorts of matters concerning the ability to expand the brand.”
Among those most involved in PVH’s fact-finding was Joseph Fuller, president and chief executive of Monitor Co. Monitor, Solomon noted, “did research showing that Calvin Klein and Giorgio Armani are by far the most known and most highly regarded designer names in the world. One of the issues that’s so compelling about Calvin is the disparity between brand recognition and brand availability. Calvin has controlled his name brilliantly, perhaps even too much.”
That, to Solomon, is the crux of the challenge facing Klatsky, chief operating officer Mark Weber and their PVH colleagues: “How do you allow the brand to maintain this incredible prominence but widen it somewhat?” he asked.
Solomon views Klatsky as the “perfect person” to spearhead this effort and also to realize immediate benefits from the ownership of CKI “just by managing it better.”
Solomon believes that Klein himself understands that PVH will engage in expense reduction at CKI but that the cuts, like those in recent years at PVH, will be appropriate and, from a marketing perspective, noninvasive.
“Bruce is a solid, smart, good manager, and I think he and Calvin are a perfectly good match,” Solomon said. “Calvin’s a huge talent in his areas, and Bruce is a guy who can get things done.”