Will PVH Make A Play For Warnaco?

Looks like PVH is doing a little window shopping.

She was hardly the first to raise the possibility, but Wells Fargo Securities analyst Evren Kopelman played matchmaker Monday in a research note on what a PVH Corp./The Warnaco Group Inc. marriage might look like.

Think $9.3 billion in sales for the combined company and $1.4 billion in EBITDA in 2013 for an acquisition in mid-2012, making it the second largest apparel firm after VF Corp., which just grew larger with its planned $2.2 billion acquisition of Timberland.

The speculation follows PVH’s chief executive officer Emanuel Chirico’s recent comments that PVH would begin eyeing acquisitions again later in the year.

Warnaco has long been speculated as a possible target of PVH, Calvin Klein’s owner, since it holds the license for Calvin Klein jeans and owns the Klein underwear business.

Presuming that Polo Ralph Lauren Corp. would take back the Chaps license under a change in control provision, the Wells Fargo analyst pegged an EBITDA multiple of 8.8 times, or a $3 billion deal at $70 a share, for Warnaco.

When PVH acquired Tommy Hilfiger last year, one attraction was its European platform. The analyst reasoned that Warnaco would be attractive because of its business in Asia and Latin America, where PVH has less exposure.

Estee Lauder Buys Smashbox Cosmetics

The Estée Lauder Companies adds another prestige cosmetics brand to its portfolio with the acquisition of Smashbox Cosmetics Beauty, Inc., the makeup company founded in 1996 by Dean and Davis Factor (left), great-grandsons of the legendary makeup artist, Max Factor, in an effort to provide products for makeup artists on professional photo shoots.

EL Cos. announced their definitive agreement with the L.A. based company on Monday, saying that the deal will close in July and will add to earnings in 2011, minus transaction and integration costs. The purchase price is unknown, however sources told WWD that the price tag was between $200M and $300M. The deal also includes a minority stake in Smashbox Studios, the Los Angeles facility started by the Factors in 1991.

With EL's strategic priorities focused on skin care and Asia, Smashbox doesn't fit the bill of a desirable acquisition. However, the makeup brand has a strong presence in open-sell environments and is a well known brand in specialty channels, such as QVC and Sephora, allowing EL to have a stronger presence in alternative retail channels. Smashbox also has expertise in digital and social media, which will help Estee Lauder to expand and reach new and younger customers. In exchange, Smashbox will be able to expand globally via EL's international experience.

L'Oreal Acquires Essie Cosmetics

After much speculation, L'Oreal USA has purchased Essie Cosmetics, one of the biggest, chicest names in the nail care industry, reports WWD. Purchase price was not disclosed, however due to Essie being a "specialized brand", industry analysts estimate that L'Oreal paid between $50-60 million for the company.

Essie Weingarten, who founded Essie, and her husband Max Sartino, CEO of the company, signed multi-year deals with L'Oreal and will stay on with the brand.

Analysts believe this deal offers several growth opportunites for Essie such as expansion into cosmetics, increasing the brand's international presence, and it allows Essie to tap into L'Oreal's vast salon network distributions to boost domestic growth. This deal also helps L'Oreal increase its market share of the nail polish market, which currently stands at 9.2% according to an article at Crain's New York Business.

I have several concerns: I hope that the quality of the product won't suffer. I'm also concerned about the possibility of the Essie brand branching out into cosmetics. L'Oreal already has a brand portfolio that covers cosmetics (i.e. L'Oreal, Lancome, Maybelline, Shu Uemura...etc.). However, what's missing from their portfolio is a brand that exclusively addresses foot and hand care needs. Keeping Essie as solely (no pun intended) a nail and hand care brand will help them compete against Coty which controls 45% of the market.

Swatch and Bulgari Squash Takeover Rumors

Swatch Group and Bulgari SpA have moved quickly to deny rumors of the Swiss company's interest in taking over the Italian jeweler.

In a statement to Reuters onMonday, Nick Hayek, Swatch Group CEO, said, "The Swatch Group has not expressed any desire to acquire Bulgari, and Bulgari has not expressed either the desire to be bought by Swatch Group. There are no negotiations in front of, or behind the curtains".

Bulgari issued a separate statement saying that they enjoyed good "business relationships" with Swatch, but that "the two Companies have never discussed any kind of transactions on shares. The Bulgari family is not interested in selling".

Speculation of a takeover first arose after comments Mr. Hayek made to German magazine, Focus, which suggested that Swatch was interested in purchasing Bulgari.

According to Reuters, Mr. Hayek said, "I do not deny that there are interesting big brands that have potential to develop" and gave Bulgari as an example. However, he insisted that Swatch was not the type of company to engage in hostile takeover battles.

Bulgari shares rose more than 5 percent after Mr. Hayek's comments were published.

(Photo: Courtesy of WWD)

SOLD! Tommy Hilfiger Goes to PVH for $3B!

Looks like the rumors were true:

Phillips-Van Heusen to Buy Tommy Hilfiger
March 15, 2010

Phillips-Van Heusen, the clothing conglomerate that owns Calvin Klein, agreed on Monday to buy Tommy Hilfiger, once a leading purveyor of colorful preppy clothing, for about 2.2 billion euros ($3 billion), in cash and stock.

Phillips-Van Heusen, which also owns Arrow and Izod and licenses brands like Geoffrey Beene and Kenneth Cole New York, is hoping to take advantage of Tommy Hilfiger’s strong European distribution channels for its own products. Despite Tommy Hilfiger’s reputation as a quintessentially American clothier, two-thirds of the company’s business is based in Europe.

“Tommy Hilfiger fits all of our acquisition criteria: a strong brand, superior management, highly profitable, immediately accretive to earnings, and focused on international growth,” Emanuel Chirico, Phillips-Van Heusen’s chairman and chief executive, said in a statement.

Under the terms of the deal, Phillips-Van Heusen will pay 1.9 billion euros in cash and 276 million euros in stock, as well as assume 100 million euros of liabilities.

The bulk of the purchase price will be borrowed money. Phillips-Van Heusen intends to finance the cash portion of the deal and refinance $300 million worth of bonds with a combination of $385 million of cash on hand, $2.45 billion of bank loans (including an undrawn $450 million revolver) and $600 million of senior unsecured bonds.

The company will also issue $200 million of perpetual convertible preferred notes issued to LNK Partners and MSD Capital that convert at $47.74 a share with no coupon or liquidation preference. If fully exercised, the securities will convert into about 6 percent of Phillips-Van Heusen’s outstanding shares.

Phillips-Van Heusen also intends to issue $200 million of new shares before the deal closes.

The deal is subject to Phillips-Van Heusen’s obtaining the necessary financing. In case that does not happen, it will pay Apax Partners, the British private equity firm, a 69 million euro break-up fee.

While Mr. Hilfiger no longer holds a management role at the company that bears his name, he will remain a principal designer and a public face for the clothier under Phillips-Van Heusen.

Read more here.

This is a good deal for both parties: The acquisition of Tommy Hilfiger makes PVH the largest clothing company in the world, amassing $4.6B in global sales, and increases the company's international presence, particularly in Europe (where more than half of Hilfiger's business is based) and Asia (where Hilfiger enjoys strong distribution). On the flip side, this is perfect timing for Hilfiger which is in the midst of a comeback thanks to an overhaul of the brand. The company stands to experience growth, on par with Calvin Klein when it was acquired by PVH in 2003. Since then, CK has grown 12%-14% per year and boasted a 6% upswing in their fiscal 2009 performance.

Will LVMH Acquire Coach?

Coach Inc. and LVMH
Sittin' in a tree
M-E-R-G-I-N-G?

According to a report from WWD, that's the speculation going around the retail industry:
LVMH will have their 2008 Annual Results Presentation on Feb. 5th, so stay tuned......

More than 13,800 Coach Inc. calls changed hands on Friday, fueled by rumors that French luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton might acquire the luxury accessories marketer, according to OptionsMonster. Typical volume for Coach calls is 2,500 contracts. A Coach spokeswoman said, “The company doesn’t comment on market rumors.” LVMH executives declined comment as well. Although Coach has been the target of mergers talks in the past, market sources noted the firm, founded in 1941, has a long history of preferring to remain independent. Shares of Coach ended Friday’s session at $14.06 in heavier than average trading of 10.8 million shares, compared with average daily volume of 7.3 million shares.

UPDATE 2/4/09:

WWD.com reports that LVMH have denied any interest in acquiring Coach, Inc.:

LVMH Moët Hennessy Louis Vuitton has squelched speculation the French luxury giant could acquire Coach, as a spokesman officially denied any interest in the American accessories marketer.

As reported, more than 13,800 Coach Inc. calls changed hands last Friday, fueled by takeover rumors. Typical volume for Coach calls is 2,500 contracts.

The denial comes a few days before LVMH is set to report its 2008 results at a press conference in Paris on Thursday.