NEW YORK — By year’s end, Levi Strauss & Co. aims to part ways with the Dockers brand, a label the San Francisco jeans giant launched in 1986 that today represents almost 25 percent of its revenues.

This story first appeared in the July 8, 2004 issue of WWD. Subscribe Today.

Since the company acknowledged in May it had hired Citigroup Inc. to look at sale possibilities, speculation has swirled as to which firm might buy it.

The size of the Dockers business — $1 billion in direct sales and another $360 million in licensed products — has kept the list short, limited to companies able to shell out the $650 million to $1 billion expected purchase price.

“The deal has got to be limited to such a small universe of participants,” by virtue of Dockers’ scale, said Andrew Jassin, a partner in the New York-based Jassin-O’Rourke Group consultancy.

Levi’s officials have said the proceeds from a sale of Dockers could put a hefty dent in the company’s $2.02 billion debt load. But they insist that, while they want to sell the unit, they don’t have to — meaning that if they don’t get their undisclosed target price, they’ll keep it.

Levi’s has been in bleak financial straits for some time. For fiscal 2003, which ended Nov. 30, the company posted sales of $4.15 billion. Levi’s revenues had peaked at $7 billion in 1996, before seven consecutive years of sales declines. The company last year took a $349 million net loss.

A financial source said the initial round of bids on the Dockers business was due last week, though Levi’s officials have kept mum on what companies have made offers. But sources in the denim, textile and financial arenas have named several firms as being likely to take a close look at Dockers. That list includes VF Corp., Hong Kong sourcing powerhouse Li & Fung Ltd. and Kellwood Co., with Jones Apparel Group and Liz Claiborne also seen as possibilities by virtue of their size and acquisitive natures.

VF officials have declined to confirm or deny their interest in Dockers, which a company spokeswoman earlier this year called “a strong brand.” The Greensboro, N.C.-based company — which, with its Lee and Wrangler brands is Levi’s largest rival — has been on a major acquisition tear, closing in recent months on the Vans and Napapijiri brands. The VF spokeswoman did not return calls seeking further comment.

At Kellwood’s annual meeting in St. Louis last month, chairman and chief executive officer Hal Upbin said of Dockers, “It would be out of character for us to make such a large acquisition, but we need to take a serious look at this opportunity.” Kellwood currently holds the license to produce women’s tops under the Dockers name. A Kellwood spokeswoman said the company’s position on Dockers remained unchanged.

The dark-horse candidate is Li & Fung, which for most of its history has served as a back-room operator, coordinating overseas buying efforts for U.S. and European apparel firms that wanted to concentrate on sales, design and marketing. Over the past year, Li & Fung officials have said they’re looking to build the company’s presence in the branded world and the firm in recent months has picked up the rights to produce certain tops under the Levi’s Red Tab and Levi Strauss Signature brands.

Li & Fung executives could not be reached for comment.

Expressions of interest haven’t been limited to multibillion-dollar enterprises, though. In May, Marc Ecko Enterprises, which does about $350 million in annual sales, claimed it was also thinking about buying Dockers, which is roughly three times its size.

Jassin noted that other possibilities were that a retailer or investor from outside the apparel industry would make a run at Dockers. A retail buyer, though, would have to decide whether to continue to wholesale the brand to its competitors or to make Dockers a house brand, which could mean losing hundreds of millions of dollars in revenue.

Small World
Possible Bidders for $1B Dockers Business
 
Revenues
Earnings
Current Assets
Debt
Li & Fung Ltd.
$5.47 billion
$157.0 million
$899.1 million
$638.9 million
VF Corp.
$5.21 billion
$397.9 million
$2.21 billion
$2.26 billion
Jones Apparel Group Inc.
$4.38 billion
$328.6 million
$1.46 billion
$1.46 billion
Liz Claiborne Inc.
$4.24 billion
$279.7 million
$1.35 billion
$966.9 million
Kellwood Co.
$2.35 billion
$71.1 million $882.9 million
$577.0 million
$577.0 million
SOURCES: COMPANY REPORTS. FIGURES ARE CURRENT FOR COMPANIES’ MOST RECENT FISCAL YEARS.