NEW YORK — The field of potential bidders for Dockers appears to be narrowing, though officials at its parent firm, Levi Strauss & Co., denied Monday that a deal to sell the $1.4 billion brand had been completed.
“We’re still very much in the midst of our Dockers sale process,” a spokesman said. “It’s still a confidential process, so I’m not going to be able to comment on any specifics.”
He declined to discuss a report in the Wall Street Journal that investment concern Vestar Capital Partners and former Sun Apparel executive Eric Rothfeld had made a joint $800 million bid for the casual pants brand.
The Levi’s spokesman also declined to comment on when a deal might be reached, but he suggested it’s not likely a sale will happen soon.
“The process would be to reach a point at which you reach a purchase agreement with a potential buyer, and then there are several weeks that would unfold prior to being able to close the sale,” he said.
Vestar officials did not respond to repeated calls for comment. Rothfeld did not return calls, either.
This wouldn’t be the first time Vestar and Rothfeld teamed up. In the late Nineties, Vestar held a minority stake in Sun Apparel Group, with Rothfeld owning the rest of the firm. They sold Sun to Jones Apparel Group in 1998, and Rothfeld remained on board as president and chief executive officer of the Sun division through 2001.
Observers called the partnership logical.
“They’ll squeeze the Levi’s cultural fat from it,” said Isaac Lagnado, president of the consulting firm Tactical.org. “They can clean it up and eventually sell it.”
Consultant Andrew Jassin, of Jassin-O’Rourke Group, said it would be “much more manageable” for an investment concern to work with one person on a deal of this kind, rather than trying to share ownership with a publicly traded corporation.
Sources said there appeared to be few other companies left that were interested in buying the brand. Dockers’ large size — last year it had $1 billion in direct sales and another $360 million in sales of licensed products — had ruled out acquisition by all but the biggest apparel companies.
This story first appeared in the September 28, 2004 issue of WWD. Subscribe Today.
Two smaller pants firms — Perry Ellis International and Haggar Corp., which had been said to be working on joint deals with other investment houses — are no longer in the running. George Feldenkreis, chairman and ceo of Perry Ellis, last week told WWD he’d dropped out of the bidding. Executives at Haggar didn’t return calls, but sources indicated the firm also had pulled out.
A spokesman for Li & Fung, the Hong Kong sourcing company, said it wasn’t planning to buy Dockers. Other firms that have been named as potential bidders since Levi’s hired Citigroup Inc. to begin shopping the brand in May include VF Corp., Kellwood, Jones, Liz Claiborne and Silas K.F. Chou.
When VF reported its second-quarter results in July, chairman and ceo Mackey McDonald said Dockers wasn’t “at the top” of the firm’s shopping list.
In June, Kellwood chairman and ceo Hal J. Upbin said that, while it “would be out of character” for his firm to make such a large purchase, Kellwood “need[ed] to take a serious look” at the brand. Kellwood holds the license to produce women’s tops bearing the Dockers brand.
Spokeswomen for VF and Kellwood didn’t provide further comment Monday.
Officials at Jones and Liz haven’t commented publicly on Dockers and didn’t return calls Monday. Chou could not be reached for comment.
Vestar in 1999 acquired a majority stake in the West Coast designer firm St. John Knits, which it retains today. Another major investor that’s bought into the industry, Texas Pacific Holdings, acquired Bally in 1999 and continues to hold that firm, which has had a checkered history under Texas Pacific’s ownership.
Lagnado suggested the best ways to grow the Dockers brand would be to boost its women’s business and to expand it into the mass channel. Today, women’s products represent less than a quarter of Dockers revenue, a low ratio for the apparel business in general, but typical for Levi Strauss.
“They could go into ladies’ in a much stronger way,” he said. “Even Levi’s has never really been the kind of power in women’s that it really could be and should be.”
Financial observers and industry executives said one thing that has apparently been slowing down the sale process is that Levi’s is looking for a hefty price for the Dockers business. As reported, this month Levi’s disclosed that its bondholders had approved the idea of a sale so long as it reduced the firm’s $2.2 billion in debt by at least one-third, which would suggest a minimum sale price of about $650 million.
According to sources, though, Levi’s is holding out for more, hoping to bring in $800 million to $900 million. That’s one of the reasons the focus has shifted toward selling to an investment concern, rather than another major apparel firm.
Lagnado said that existing apparel firms “could put that kind of money into internally developing a brand.”