Phillips-Van Heusen Buys Tommy Hilfiger for $3 Billion

Phillips-Van Heusen Corp has purchased clothing making Tommy Hilfiger for around $3.0 billion.

NEW YORK—Phillips-Van Heusen Corp. (PVH) agreed to purchase clothier Tommy Hilfiger Corp. in a cash and stock deal on Monday that values the company at roughly $3 billion.

The New York-based Phillips-Van Heusen currently owns Calvin Klein, Arrow, and Izod brands, and operates a number of other brands as well as licenses clothing brands such as Kenneth Cole.

The Hong Kong-based Tommy Hilfiger is being sold by British private equity company Apax Partners, which bought the firm for $1.6 billion four years ago. PVH will pay for the deal with 1.9 billion euros (US$2.6 billion) of cash and 276 million euros (US$380 million) in stock, the companies said. PVH will assume roughly 100 million euros (US$138 million) in liabilities. Apax will remain a shareholder in the combined company.

Next Phase' in Tommy Evolution

Tommy Hilfiger is primarily known for its colorful and preppy clothing and gained popularity during the 1990s. Today, the company generates two-thirds of its sales from Europe.

The new company would become one of the world’s largest independent clothing makers with $4.6 billion in global revenues.

Emanuel Chirico, CEO of PVH, said in a company statement that the acquisition will be “a unique opportunity to bring together two premier companies, each with iconic brands. Tommy Hilfiger fits all of our acquisition criteria: a strong brand, superior management, highly profitable, immediately accretive to earnings, and focused on international group.”

“This is the next phase in the global evolution and expansion of the Tommy Hilfiger brand,” said Tommy Hilfiger, founder and principal designer. “I am confident that Manny Chirico and the PVH organization will provide Tommy Hilfiger with the support and investment to allow my great partners in the Tommy Hilfiger organization to do what is necessary to take our brand to new heights.”

Hilfiger will remain as principal designer of his namesake brand under PVH ownership.

Ratings Cut

On Monday, credit ratings agency Moody’s said it may cut PVH’s credit rating, on the debt load it would take on to acquire Tommy Hilfiger.

“This transaction will result in significantly increased scale for PVH and the combined firm will have much greater diversification by brand, distribution channel, and product category,” Moody’s analyst Scott Tuhy said in an interview with Reuters.

A significant portion of the cash PVH will pay Apax to purchase Tommy will be borrowed debt. PVH currently has about $100 million in outstanding debt.