Apax Partners has agreed to take Tommy Hilfiger private, paying $1.6 billion (€1.35 billion) for the clothing designer.
The auction for the Hong Kong-based company has been ongoing since the fall. Wal-Mart was rumored to be involved in the bidding, while the Wall Street Journal named Sun Capital Partners and a pairing of Oak Hill Capital Partners and Perry Capital as also participating in the JP Morgan-led auction.
The sale to Apax makes sense considering the group has significant experience in the clothing and retail sector. In 2002, the New York- and London-based firm helped fund Phillips-Van Heusen’s acquisition of Calvin Klein. Other fashion investments include deals for Canadian retailer Comark and UK clothing chain New Look Group, as well as a 2001 investment in Tommy Bahama by Saunders Karp Megrue, which was merged into Apax last year.
The link between Apax and Phillips-Van Heusen has led to speculation that there could be opportunity for potential synergies. Phillips-Van Heusen even issued a press release soon after the deal’s announcement stating that while nothing has been agreed to yet, the company is in “preliminary discussions” with Apax to explore how it can work together with Tommy Hilfiger. However, Phillips stressed in the statement that “there can be no assurance” that anything definitive will necessarily materialise.
Tommy Hilfiger designs men’s and women’s sportswear and jeans, and markets its products under the Tommy Hilfiger and Karl Lagerfeld brands. The company, which operates roughly 200 retail locations, also has licensing agreements to sell goods such as footwear, fragrance and home furnishings under the Tommy Hilfiger name.
The acquisition, at $16.80 per share, came in below analyst expectations. Prudential Financial issued a research note last week in which it raised its price target on the stock to $17 a share, calling that “the minimum price at which we think an acquisition would occur”.
The sale is not part of an exit strategy for company figurehead Tommy Hilfiger, who founded the business and serves as its principal designer and honorary chairmain. He will continue on in the principal designer role and at the completion of the buyout will also chair the company’s strategy and design board.
JP Morgan advised Tommy Hilfiger on the sale, while Wachtell, Lipton, Rosen & Katz served as legal counsel to the clothier. Apax was advised by Citigroup and Credit Suisse First Boston and received legal advice from a team of Skadden, Arps, Slate, Meagher & Flom and Clifford Chance.
The structure of Apax’s financing arrangement has not been made public, although Citigroup and CSFB will lead the debt syndicate, which will likely include participation from existing Tommy Hilfiger lender Fortis Bank.
The deal is expected to close in the spring of next year.