VF Corp. said it’s “exploring strategic alternatives” for its roughly $550 million Licensed Sports Group business, but timing might be everything as buyers take a look.
“As active portfolio managers, we constantly assess the composition of our company to ensure VF’s portfolio is aligned with our strategic objectives and positioned to maximize growth and return to our shareholders,” said Eric Wiseman, chairman and chief executive officer. “In this respect, we are exploring options for our LSG business to position the organization to continue its success and achieve its future potential.”
In corporate speak, “exploring strategic alternatives” means that the business has been put up for sale.
KeyBanc Capital Markets analyst Edward Yruma said that it’s “not clear there is a logical acquirer. One of the major sporting good companies — Nike, Under Armour or Adidas — could look at it. I’d also add G-III as they have a team sports business.”
The Licensed Sports Group includes the Majestic brand and supplies apparel and fanwear through licensing agreements with professional sports leagues, colleges and universities. It has licenses with Major League Baseball, the National Football League, the National Basketball Association, the National, the National Hockey League and more.
One financial source said it is an interesting business, but that “the trick with many of these [deals] is getting the consent of the licensor and making sure that the license terms are long enough that you can buy the business and not lose the renewal.”
Such businesses have not always found ready buyers.
Adidas is said to have been out in the market last year trying to sell its Michelle & Ness business, which specializes in retro sports gear, but no deal materialized.
VF said the overall Imagewear coalition logged sales of $1.1 billion last year, with the Licensed Sports Group making up about half of that total.
On a conference call with Wall Street last month, Nomura Securities analyst Bob Drbul asked Wiseman whether the company was more likely to sell businesses or make another acquisition. The ceo said, “As we look back over the last four years — people have said, you haven’t made an acquisition in four years and, we quite frankly, haven’t made a divestiture in four years or five years either. You talked about being active portfolio managers, so how do you define active? And what we’re saying now is we’re defining active as being active.
“The fair and honest assessment of the last four years is when we acquired Timberland, for the next two years, we were not in the acquisition market, period, flat out, we were not,” Wiseman said. “We were very focused on delivering the shareholder returns that we promised to our shareholders with the biggest acquisition we ever made, and we’ve done that. But for the last two years, we’ve not made an acquisition. We are actively exploring everything in our portfolio and everything that we might want to have in our portfolio with a level of activity that hasn’t existed for the last few years, and we think it’s likely something will change this year. I can’t give you any more guidance about how that change might happen.”
VF is one of the few companies with a solid track record of cutting big deals in fashion and could be cleaning up its business while leaving its options open for another big deal. The market would seem to be ripe for such a transaction. Competitor PVH Corp. has signaled that it might look at smaller deals this year, before turning to adding a third big brand to its portfolio to sit alongside Tommy Hilfiger and Calvin Klein.
VF’s Licensed Sports Group has been growing lately, although it faces competition in the still-hot active and sports market.
Scott Baxter, VF vice president and group president of jeanswear, Imagewear and South America, said that the Licensed Sports Group saw slight revenue growth in the fourth quarter but that the Imagewear division’s revenues fell 12 percent due to weakness in the workwear business.
“In LSG, our Major League Baseball Cool Base jersey saw sustained momentum in the fourth quarter and finished the year strong,” Baxter said. “Our street fleece baseball product, which launched during the postseason, also had strong results during the quarter. In 2016, we’ll be introducing a new patented flex-based, on-field uniform, which we expect will continue to create healthy demand in this category.”
The company said the review does not include the Image division of VF Imagewear, which produces workwear worn by industrial, service and government sectors workers.
VF is one of fashion’s biggest players with powerhouse brands such as The North Face, Vans, Timberland, Wrangler, Lee and Nautica. The company’s 2015 profits rose 17.6 percent to $1.23 billion, on a 0.8 percent increase in revenues to $12.38 billion.