PEI COMPLETES JANTZEN DEAL
Byline: Vicki M. Young
NEW YORK — Perry Ellis International Inc. will consummate its acquisition of the Jantzen operation from VF Corp. for $25 million today, and company officials suggest that other purchases could be coming.
The acquisition is the first step of a larger plan to move into the women’s market and broaden its existing offerings in its core men’s market.
Executives at PEI told WWD that Jantzen serves as the springboard for the firm’s reentry into the vertical production of women’s swimwear and sportswear. A proven swimwear operation already in place could serve as a starting point for bringing in other brands under the Jantzen umbrella through the acquisition of labels or licenses.
PEI executives said that they would consider an acquisition of Warnaco swimwear properties down the road if the right terms and conditions were met.
Tim Page, chief financial officer, said, “That does cross one’s mind. We haven’t done anything toward making an offer and it would be foolish not to look at those opportunities. While it is a much bigger transaction [than Jantzen], we’re not ruling anything out.”
Warnaco’s swimwear brands include Anne Cole, Catalina and certain Ralph Lauren labels under license. The Jantzen purchase includes rights to Nike and Tommy Hilfiger women’s swimwear licenses.
In addition, the Jantzen properties potentially could bring in far more than their current $1.5 million in royalty payments from 11 licenses, executives said. Jantzen currently has international swimwear and sportswear licensees in Europe, Japan, Korea, Australia, Mexico and Taiwan. While it produces goggles, sandals and coverups for Nike under license, there is no similar offering under the Jantzen brand, an area that Page said PEI will target, whether inhouse or through licensing.
George Feldenkreis, chairman and chief executive officer, said, “We plan to make this a major cornerstone of our company going forward. We’re a $290 million company. In a couple of years, with the growth of Jantzen and through extension lines, we should be a $500 million company. This acquisition is a major step for us.”
Page reported that the purchase price includes all Jantzen-related trademarks and inventory for the 2003 swimwear season, as well as all company archival material, such as marketing artwork. “With its 90-year history and the historical materials that we will get,” he noted, “there is potential for us to use that material for [a line of] retro-type product.”
VF retains inventory for the 2002 swimwear season, which ends June 30, the same day that the Jantzen operation will be fully transitioned over to PEI.
Feldenkreis said that the Jantzen design, production and sales groups will remain intact and continue operations from their home base in Portland, Ore. The company is in the process of interviewing candidates for the post of president of the Jantzen division to succeed Steve Fritz, who is staying at VF. Executives at VF declined comment about the Jantzen sale but, as reported, the company announced last November that it would sell off underperforming businesses.
According to Page, PEI will fund the purchase in part from a $57 million offering of 9 1/2 percent senior bonds maturing on March 15, 2009. A portion of the proceeds will also be used to pay down existing senior bank facilities.
Jantzen, with annual wholesale revenues of $70 million, could reach $100 million for the 2003 swimwear season. Feldenkreis said that PEI will add girls’ and men’s swimwear lines for the 2003 season, with private label production later on. The new lines will likely be developed out of PEI’s headquarters in Miami.
In addition, the chairman said that the company will be keeping its wholesale price points, which start at $30. Jantzen’s opening price point at retail will remain $68, Tommy at $80 and Nike at a wider range because of its presence in the competitive sportswear market and existing arrangements with dealers.
Page noted that the acquisition, because of the timing of its closing date and the start of the next swimwear season, will likely be “neutral to slightly positive for 2002, with significant accretion in 2003.”
The Jantzen swimwear collection is sold primarily in major department, sporting goods and specialty swimwear stores. Among the other trademarks PEI acquires is the Southpoint brand sold in Sears and Kohl’s, and the Electric Beach brand targeting the younger customer at specialty stores. Other trademarks might be resurrected by PEI, Page said.
As part of its wind-down process, VF will close a sewing facility in Portland, with PEI moving the work to existing Jantzen contractors in Mexico and Guatemala. In addition, PEI is likely to exercise its option to buy from VF Jantzen’s 350,000 square-foot distribution facility in Seneca, S.C., which PEI is currently leasing, Page said.
As reported, PEI has licenses for women’s apparel in its Perry Ellis line. Now the company is looking at its Jantzen acquisition to help it enter the inhouse design and production arena. PEI may first have to make do with a licensee if it wants to have product ready for fall 2003, according to Feldenkreis.
The chairman said that in the past it has been difficult to “seriously” enter the women’s market because of competencies required in dealing with delivery and production timetables that differ from those in men’s wear. Existing management at Jantzen is expected to help PEI understand those differences, he said.