Published October 31, 2012
PVH Corp will buy lingerie and sportswear maker Warnaco Group Inc for about $2.8 billion in a cash-and-stock deal to bring the Calvin Klein clothing brand under one roof.
PVH, which owns and makes formal wear and sportswear under the Calvin Klein brand, will gain the underwear and jeans businesses that have been under license to Warnaco since 1997.
PVH expects the combined businesses to generate $8 billion in revenue for the full year.
"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," PVH Chief Executive Emanuel Chirico said in a statement on Wednesday.
Warnaco, which also sells products under brands such as Speedo, Chap, Warner's and Olga, operated 1,759 Calvin Klein retail stores worldwide as of December 31, 2011.
PVH, which also owns the Tommy Hilfiger brand, is offering Warnaco shareholders $51.75 in cash and 0.1822 of a share of PVH common stock for each Warnaco share.
Based on PVH's last closing stock price, the per share value of the deal is $68.43, a 34 percent premium over the last closing price of Warnaco common stock.
The deal value is based on Warnaco's 40.87 million shares outstanding as of August 1.
Warnaco's Calvin Klein businesses will be run by Tom Murry, chief executive of Calvin Klein, following the close of the deal in 2013.
PVH, which expects the deal to add 35 cents to adjusted earnings per share in the first year after it closes, said it will incur one-time costs of $175 million over three years.
PVH also said it expects its full-year profit to be at the top end of the range.
The company, which competes with Ralph Lauren Corp , Perry Ellis International Inc and Michael Kors Holdings Ltd , said it has commitments for $4.33 billion in financing from Barclays, BofA Merrill Lynch and Citigroup Global Markets Inc.
Shares of PVH closed at $91.50 while Warnaco's stock closed at $50.88 on Friday on the New York Stock Exchange. (Reporting by Siddharth Cavale and Sakthi Prasad in Bangalore; Editing by Erica Billingham,; Sriraj Kalluvila)