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Heusen buys Hilfiger for US$3bn

Phillips-Van Heusen, the clothing conglomerate that owns Calvin Klein, announced today that it would buy Tommy Hilfiger, one of a leading purveyor of colourful clothing, for about 2.2 billion euros, or $3 billion, in cash and stock.

In a statement today, Phillips-Van Heusen said the buyout would create “one of the world’s largest and most profitable apparel companies”.

With the acquisition, Phillips-Van Heusen, which also owns Arrow and Izod and licenses brands like Geoffrey Beene and Kenneth Cole New York, will seek to take advantage of Tommy Hilfiger’s strong European distribution channels for its own products.

Despite Hilfiger’s reputation as a quintessentially American clothier, two-thirds of the company’s business is based in Europe.

The deal includes the assumption of 100 million euros ($138 million) in liabilities, Phillips-Van Heusen said. The chief executive of Phillips-Van Heusen, Emanuel Chirico, said in a statement that the acquisition was “a unique opportunity to bring together two premier companies, each with iconic brands”.

“Tommy Hilfiger fits all our acquisition criteria: a strong brand, superior management, highly profitable, immediately accretive to earnings and focused on international growth,” as said by Chirico.

While Hilfiger no longer holds a management role at the company that bears his name, he remains a principal designer and a public face for the clothier. The deal is only the latest to emerge from an active market for mergers and acquisitions, as corporate buyers feel more confident pursuing long-desired targets.

The sale of Tommy Hilfiger would be a lucrative exit for its current owner, the British private equity firm Apax Partners.

Apax has twice sought an initial public offering for the clothier, and Tommy Hilfiger’s chief executive, Fred Gehring.

Under the terms of the deal, Phillips-Van Heusen will pay a combination of cash and stock, though most of the offer would be in cash. Apax will still own about 13 per cent of the American clothing company. Phillips-Van Heusen is expected to take on more than $2.5 billion in debt to finance the deal.

A deal would provide yet another owner for Hilfiger, whose founder has weathered a series of ups and downs over the last two decades.

Cashing in on the craze for his particular brand of prep — emblazoned with a stylised American flag — Hilfiger was among the first American designers to take his company public. His clothing changed with the times, gaining popularity among rap stars as its proportions swelled to take advantage of trends in street-wear.

Contributed by: Our Special Correspondent
City: Oxford
Country: UK
Date: March 15, 2010