Apparel Merger Unites Calvin Klein Lines

Retail

Published: October 31, 2012 11:10 am

PVH Corp. (NYSE: PVH) announced this morning that it has entered a definitive merger agreement with The Warnaco Group Inc. (NYSE: WRC) and will acquire Warnaco for $2.9 billion. The transaction includes $51.75 in cash and 0.1822 share of PVH stock for each share of Warnaco stock. Based on Friday’s closing price for PVH stock, the deal is worth $68.43 a share, a 34% premium to Warnaco’s closing price last Friday.

On a pro forma basis, the merged company’s revenues will top $8 billion. The merger is subject to the usual regulatory reviews and shareholder approvals, and is expected to close in early 2013.

PVH’s CEO said that the deal will reunite two Calvin Klein brands under one roof and “reinforces our strategy to drive the global growth of Calvin Klein.” He also noted:

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.

PVH also boosted its third-quarter and full-year adjusted EPS guidance “to be at least at the top end of its guidance range.” That previously announced range for the third quarter is $2.28 to $2.30 and for the full year is $6.32 to $6.37.

Shares of PVH are up 19% at $108.88 in a 52-week range of $62.81 to $112.47. Warnaco’s shares are up 38.3% at $70.39 after posting a new 52-week high of $71.41 earlier this morning. The prior range was $39.19 to $60.69.

Warnaco’s lofty share price could indicate that investors might be anticipating a better offer.

Paul Ausick

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