PVH Reunites Calvin Klein Brand in $2.9B Deal with Warnaco

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Published October 31, 2012

| FOXBusiness

Apparel company PVH (PVH) has inked a cash-and-stock deal to buy Warnaco (WRC) for $2.9 billion, a move that gives it full control of the Calvin Klein clothing brand.

The transaction will make PVH one of the world’s largest global branded lifestyle apparel companies, with a portfolio of brands led by Calvin Klein, Tommy Hilfiger and Speedo, and revenue of more than $8 billion.

The agreement calls for PVH to pay $51.75 in cash and 0.1822 of PVH stock for each share of Warnaco, representing a 34% premium over Warnaco’s closing price of $68.43 on Friday.

The merger, approved by both companies’ boards of directors, is expected to close in early 2013. At that time, Warnaco shareholders will own about 10% of PVH.

Warnaco CEO Helen McCluskey will join PVH’s board of directors.

PVH is anticipating $100 million of annual synergies from the transaction, which will be fully realized over three years. To get there, the apparel company will take a one-time charge of about $175 million over a three-year period.

The company expects the transaction to be 35 cents a share accretive to earnings in the full year after the transaction closes, currently slated to be fiscal 2013. Once the synergies are realized, PVH expects the transaction to be accretive to earnings by a dollar a share.

“This is a unique opportunity to reunite the ‘House of Calvin Klein’ and reinforces our strategy to drive the global growth of Calvin Klein,” PVH Chief Executive Emanuel Chirico said in a statement. “Having direct global control of the two largest apparel categories for Calvin Klein – jeans and underwear – will allow us to unlock additional growth potential of this powerful designer brand across all major product categories, geographies and distribution channels.”

The closing of the transaction is subject to customary conditions, including approval by Warnaco shareholders and antitrust regulators.

Commitments for $4.325 billion of financing has been received from Barclays (BCS), Bank of America Merrill Lynch (BAC) and Citigroup (C).

PVH anticipates earnings per share for the fiscal quarter ended Oct. 28 and fiscal 2012 earnings to be at least at the high end of its guidance. Warnaco is expected to report third-quarter profit of about $612 million on Nov. 5 and expects non-GAAP EPS to be in line with the consensus.

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