Four months after it put itself up for sale, clothing company Tommy Hilfiger Corp. agreed to accept a $1.6 billion, or $16.80 a share, cash bid from Apax Partners, a private investment company.
Hilfiger, known for its red, white and blue logo that resembles a signal flag in sailing regattas, expects the deal to close by Spring 2006 subject to shareholder approval.
While Apax did not detail its plans for Hilfiger, which went public in 1992 and is traded on the New York Stock Exchange, the firm is expected to be taken private. It is seen operating as a private company focused on expanding overseas and keeping its brand relevant in the United States.
“When you are not in a public arena, you don’t have to worry as much about short-term earnings prospects,” said Robert Weible, a partner at Baker & Hostetler LLP’s Cleveland office, which offers legal advice for companies undertaking mergers and acquisitions. “The other benefit is that you can save substantial money in not having to do regular public reporting to the Securities and Exchange Commission ... and onerous requirements related to auditing,” Weible said.
Apax’s offer for the clothing designer is a 5 percent premium to Hilfiger’s Thursday closing stock price of $16 on the New York Stock Exchange. Hilfiger shares were off 7 cents at $15.93 in afternoon trading after the news.
Apax Partners operates in the U.S., Europe, Israel and Asia, and has invested in private and public companies, among them Phillips-Van Heusen, Tommy Bahama, and the Children’s Place.
“This is an exciting new phase in our evolution as a global lifestyle company ... in addition to ensuring the strength of the Tommy Hilfiger brand at the higher end of the spectrum, we can continue to move ahead with the already successful global expansion,” Tommy Hilfiger, the company’s founder and principal designer, said in a statement Friday.
Laura Brightsen, spokeswoman for Apax, said there were no specifics available about its growth and expansion plans for Hilfiger. Officials at Hilfiger were not immediately available for comment about the deal.
Hilfiger, who introduced the company’s first clothing line in 1984, plans to remain actively involved in the company. He entered an employment agreement in which he will continue as principal designer and chairman of the company’s strategy and design board after the deal closes.
Fred Gehring, chief executive officer of Tommy Hilfiger Europe, and Ludo Onnink, chief financial officer of Tommy Hilfiger Europe, also agreed to enter new employment agreements when the buyout is completed. David Dyer, chief executive officer of Hilfiger is leaving the firm and Gehring will take over leadership of the company.
J.P. Morgan Securities Inc. acted as exclusive financial adviser to Tommy Hilfiger, which put itself up for sale in August. Citigroup and Credit Suisse First Boston provided financing for the acquisition.
Hilfiger, through its subsidiaries, designs and markets men’s, women’s and children’s clothing. The company’s brands include Tommy Hilfiger and Karl Lagerfeld.
Through licensing agreements, Hilfiger offers a wide range of related apparel, accessories, footwear, fragrances, and home furnishings.
In a report about Hilfiger published last month, analysts at JPMorgan Chase & Co. said “despite recent improvements, sell-through performance remains unhealthy compared to its peers. Recent management changes and the exit into a turnaround remains murky, and we see potential of the brand’s sustained decline,” the investment bank warned, adding that Hilfiger’s comparatively high department store exposure and singular brand strategy could impede future growth.
That same report noted that Hilfiger’s European wholesale business should continue to deliver sales growth, but cautioned that “its recent growth will likely slow over time.”
Firms like Apax raise money from investors such as pension funds and college endowments. The money is then invested in private and public companies. Apax manages $20 billion worth of investments and one of its co-founders, Alan Patricof, helped finance Apple Computers Inc. and America Online when they were just startup businesses.