PVH to buy Warnaco for Calvin Klein control

Wed Oct 31, 2012 9:31am EDT
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By Nivedita Bhattacharjee

(Reuters) - PVH Corp (PVH.N: Quote) will buy rival Warnaco Group Inc WRC.N for about $2.8 billion in a cash-and-stock deal that will give the company control of the Calvin Klein clothing brand.

PVH bought Calvin Klein in 2003 and makes formal and sportswear under that brand, while Warnaco has held the licensing agreements for Calvin Klein jeans and underwear since 1997.

Shares of both companies jumped in premarket trading after they announced the deal on Wednesday.

"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," PVH Chief Executive Officer Emanuel Chirico said in a statement on Wednesday.

The parties expect the deal to close in early 2013, after which former Warnaco stockholders will own about 10 percent of PVH stock.

The combined business will have $8 billion in annual revenue. PVH said it expected the acquisition to add 35 cents a share to earnings, excluding special items, in the first year and $1 in the third year, when it forecasts annual savings of about $100 million.

The company said it now expected full-year earnings per share to come in at the high end of its October 2 outlook of $6.32 to $6.37 per share excluding special items.

Based on PVH's closing price of $91.50 on Friday, the last day the stock traded, the deal values Warnaco at $68.43 a share for a premium of 34 percent. Trading was closed on Monday and Tuesday due to the Hurricane Sandy.   Continued...

A model presents a creation at the Tommy Hilfiger Fall/Winter 2012 collection during New York Fashion Week February 12, 2012. REUTERS/Allison Joyce