This year is fast becoming the year of the spin-off and the first one is officially happening in just over three weeks.
VF Corp. today announced it will spinning off its jeans brands Wrangler, Lee and Rock & Republic and its outlet business into a separate entity called Kontoor on May 22, after its board gave the move the green light.
The idea behind the breakup, which was first mooted in August, is to separate the relatively staid jeans brands from VF’s best-performing names: Vans and North Face. The latter two and the rest of VF’s remaining brands generate $11 billion in sales, while earnings before interest, taxes, depreciation and amortization clock in at $1.8 billion. This dwarfs Kontoor’s sales of $2.7 billion and EBITDA of $385 million.
As part of the deal, Kontoor, which will stay in North Carolina while VF will move to Denver, will get its own dedicated management team that can focus on capturing a bigger slice of the resurgent denim market — a category that is bouncing back after some tough ath-leisure competition.
Its executives will also no doubt be hoping that it can ride the waves of Levi Strauss & Co.’s blockbuster return to the stock market in March.
VF is not the only company in the break-up stage. Gap Inc. announced recently that it is splitting itself into two publicly traded companies. One will be made up of Old Navy, while the other — a yet-to-be-named company — will consist of Gap, Athleta, Banana Republic, Intermix and Hill City.
At the same time, the J. Crew Group is also planning on launching a Madewell IPO. Sources told WWD last week that it’s likely to happen sooner rather than later. There has been speculation that the company could IPO 50 percent of Madewell, but that depends on market conditions, and a different source close to the company said there’s no determination on that yet.