Byline: Karyn Monget

NEW YORK — The creation of a Calvin Klein megabusiness has moved another step forward, with The Warnaco Group reaching a definitive agreement to acquire Designer Holdings.
Papers were signed Thursday night by Linda J. Wachner, Warnaco’s chairman and president, and Arnold Simon, DH president and ceo, at Warnaco’s lawyers office.
As reported, the companies reached an agreement in principle on Sept. 17, with the acquisition price then set at $11 a share in Warnaco stock. That put the value of the deal at about $354 million.
The definitive agreement refines those terms, putting the price at 0.324 of a Warnaco share for each DH share. Based on the average of the last eight trading days of Warnaco stock, the value to the DH shareholders remains approximately $11 a share. On the New York Stock Exchange Thursday — before the definitive agreement was revealed — Warnaco shares closed at 33 7/16, down 13/16, while Designer Holdings shares were unchanged at 9 11/16.
Following consummation of the merger, expected to take place by yearend, shareholders of DH would own about 16 percent of Warnaco’s stock.
Warnaco, whose overall sales last year came to $1.06 billion, has built its Calvin Klein intimate apparel and men’s underwear and accessories business to a volume of $302.4 million reached last year.
DH posted sales last year of $480.3 million, with some $470 million of that coming from its Calvin Klein business. DH holds a 40-year extendible license for Calvin Klein Jeans, CK/Calvin Klein Jeans and CK/Calvin Klein/Khakis.
The merger will give Warnaco control of one-third of the $2.5 billion Calvin Klein wholesale business worldwide.
This consolidation reportedly irked some Calvin Klein executives who were concerned about the amount of leverage this would give Warnaco. However, the designer, himself, joined a conference call with Wachner and Simon Thursday night to give a nod to the deal.
“Obviously, Linda and Warnaco have been important in our underwear business,” Klein said, “and have demonstrated tremendous growth and a great partnership.
“We are looking forward to continuing that in the jeans world. I think we have a great start, and a lot to build on in the U.S. — that’s as much as I can say at this point,” Klein said.
Simon said Designer Holdings will become a new Warnaco division called Calvin Klein Jeans Co. He will run the operation as president and ceo.
Wachner, obviously elated with the completed pact, commented: “It’s absolutely great news.” In a statement, she added, “We look forward to working with Arnold Simon to further the Calvin Klein Jeans and Khakis businesses by aggressively pursuing new avenues for growth.”
In connection with the transaction, Warnaco noted it has also entered into an exchange agreement to acquire, as a first step, at the merger price all the shares of Designer Holdings owned by New Rio LLC, which owns 51.3 percent of DH’s outstanding share. New Rio is owned by Charterhouse Bank and Simon.
With this purchase, Warnaco will be entitled to control the DH board, while it guarantees DH shareholder approval of the Warnaco-DH merger.

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