NEW YORK (AP) — Two iconic American clothing labels — preppy Tommy Hilfiger and classic Calvin Klein — are coming together under one roof after Phillips-Van Heusen said it will purchase Tommy Hilfiger for about $3 billion in cash and stock.
The deal adds a prominent brand to Phillips-Van Heusen's stable, which also includes Izod and Arrow. It's expected to help Phillips-Van Heusen introduce some of its brands overseas, where privately held Hilfiger is strong.
Shares of Phillips-Van Heusen, which owns and markets the Calvin Klein brand, rose 10 percent during midday trading and briefly reached a 52-week high.
Phillips-Van Heusen, based in New York, said the combined company's revenue will total about $4.6 billion.
"This transaction brings together two highly complementary companies with iconic brands," CEO Emanuel Chirico said in a call with analysts.
About 60 percent of the combined company's revenue will come from the U.S. and 40 percent will come from overseas, Chirico said. About 45 percent of revenue will be wholesale, 45 percent retail and 10 percent licensing.
Tommy Hilfiger will remain in his role as principal designer, setting the vision for the Tommy Hilfiger brand.
"We fully expect to maintain Tommy's team and culture as we did in our acquisition of Calvin Klein," Chiciro said. "Meaning all of Tommy's existing design, marketing, sales, and other customer- and consumer-facing operations will remain in place."
The Tommy Hilfiger brand, which became famous for its preppy clothes and built big shops next to other powerhouse designer names such as Calvin Klein and Ralph Lauren in U.S. department stores, has had rocky times. By the late 1990s, the brand lost its appeal and underwent a series of fashion makeovers to turn around sales. Department stores reduced the size of its displays.
However, under Apax's control, Tommy Hilfiger's business underwent a revival in U.S. sales in the U.S. as it turned back to its preppy roots in the last few years and sought to boost profitability.
In 2007, Tommy Hilfiger struck an exclusive partnership with department store operator Macy's Inc. to sell its clothing, a move that has helped shore up business. The company's fragrance, home furnishings, accessories and other products are still being sold at other stores as well as Macy's. The clothing also is sold at the brand's own stores and Web site.
Phillips-Van Heusen's purchase of Tommy Hilfiger goes against the grain of clothing conglomerates shedding labels as they aim to be more nimble in a tough U.S. retail environment.
Liz Claiborne Inc., for example, announced a major restructuring in 2007 to focus on fewer but more powerful brands such as Juicy Couture and Lucky. In October, Claiborne announced a deal to move its namesake line to J.C. Penney Co. from Macy's Inc. and other stores. It said it's taking the line designed by Isaac Mizrahi to the TV shopping channel QVC.
But Phillips-Van Heusen expects to take advantage of Tommy Hilfiger's European strength to expand its own portfolio there.
Fred Gehring will continue as CEO of Tommy Hilfiger, and also become CEO of Phillips-Van Heusen's international operations. He will also join the Phillips-Van Heusen board of directors.
The sale does not require a shareholder vote and is expected to close in Phillips-Van Heusen's second quarter.
PVH said it expects the deal to immediately help earnings by 20 cents to 25 cents per share, excluding one-time items, beginning in the current fiscal year ending Jan. 30, 2011.
It said the deal will help earnings by 75 cents to $1 in the fiscal year ending Jan. 29, 2012.
Phillips-Van Heusen expects to save $40 million annually as a result of the deal.
The deal includes approximately 1.9 billion euros in cash ($2.6 billion) and 276 million euros ($379.9 million) in Phillips-Van Heusen stock. Phillips-Van Heusen will also assume 100 million euros ($137.6 million) in liabilities.
A group led by the buyout firm Apax Partners acquired Tommy Hilfiger in May 2006 for about 1.2 billion euros. It said it has invested more than 400 million euros in the business, added 1,000 employees and nearly doubling the number of stores to 1,002. Apax will retain a 13 percent stake in the company.
Apax Partners also provided financing when Phillips-Van Heusen bought Calvin Klein in 2003.
Shares of Phillips-Vah Heusen rose $4.98, or 10.4 percent, to $52.70 during midday trading, after earlier reaching a 52-week high of $54.64. Its stock had traded between $16.38 and $48.78 over the past year.
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AP Business Writer Michelle Chapman in New York contributed to this story.
