Tommy Hilfiger and Calvin Klein to Be under One Owner

Phillips-Van Heusen (“PVH”), owner of the Calvin Klein label, has agreed to buy fashion brand Tommy Hilfiger from Apax Partners for $3 billion. The purchase price consists of $2.6 billion in cash and $380 million in shares in PVH. The deal is expected to close within the next three months.
If the deal goes through, it will make PVH one of the largest suppliers of menswear to U.S. department stores, and will add another high-profile name to PVH’s lineup, which includes Izod and Calvin Klein. PVH also distributes menswear under labels such as Kenneth Cole New York, Michael Kors, Donald Trump and DKNY.
To finance the acquisition and to refinance other loans, PVH is expected to take on over $3 billion in debt, which has caused credit rating agencies Moody’s Investors Service and Standard & Poor’s to state that they may cut their ratings on the company. However, this did not affect PVH’s share price, which increased 10% upon announcement of the deal.
The current owner of Tommy Hilfiger, private equity firm Apax Partners, which bought the company in 2006, did have plans to take the company public for $1.6 billion. As a result of the sale to PVH, it is reported that Apax will make 4.5 times its investment and will hold about seven percent of the stock in PVH, so it will not be overly upset that an IPO did not take place. In fact, private equity firms have been increasingly able to exit investments as the economy and markets have stabilized, but it has been more problematic to do so through a public offering.