Fashion house sews up a US$1.6b deal

Tommy Hilfiger

NEW YORK - After several months of searching for a suitor, Tommy Hilfiger has embraced the same private equity firm that two years ago helped buy out fellow American designer Calvin Klein.

The deal means Apax will pay US$1.6 billion in cash for the design house.

In 2003, Apax teamed up with clothing vendor Phillips-Van Heusen to buy Calvin Klein and PVH said it was in preliminary talks with Apax on how they could collaborate on a Tommy deal.

"This is an incredible brand, a great American brand that we think we can continue to grow globally," said John Megrue, Apax co-chief executive officer.

John Orrico, fund manager of the Arbitrage Fund, a mutual fund that specialises in merger targets, said that in light of Tommy's 49 per cent share rise this year (to around US$16), the price seemed fair.

"They're getting taken out in line with market expectations," Orrico said. "If Tommy were worth more it would have been trading at more."

Apparel industry consultant Andrew Jassin, of Jassin-O'Rourke, said the price reflected Apax's realisation that it would take additional investment to return the brand to growth after two years of consecutive sales declines.

He said that Phillips-Van Heusen's involvement could prove an advantage on that front.

Tommy Hilfiger, which maintains headquarters in Hong Kong and New York, has struggled with relatively flat sales for the past five years.

In an effort to improve performance, it tweaked its design direction, in the late 90s turning away from its classic American roots to embrace the bright colours and baggy clothes of hip-hop style, only to return to its roots in recent years as its core customers lost interest in the baggy-jeans fad.

Tommy Hilfiger's namesake and founder has agreed with Apax to enter into a new employment agreement in which he will continue as principal designer and chairman of the strategy and design board.

- REUTERS