CHARLOTTE, N.C. — In a move that is expected to add more cache to its repertoire of brands, VF Corp. agreed Monday to buy high-end clothing company Nautica Enterprises Inc. for nearly $586 million.
The all-cash offer by VF, the maker of men's and women's sportswear and Lee and Wrangler jeans, represents a 28 percent premium to last Thursday's closing price of $13.19 for Nautica shares. The stock has traded between $14.78 and $8.06 in the past year.
Greensboro-based VF, which calls itself the world's largest apparel company, said the acquisition will boost its presence in department and specialty stores and provide additional sportswear lines.
Monday's acquisition is the latest example of the buying frenzy by large U.S. apparel companies, which are acquiring brands to expand their growth in an overall sluggish environment. Tommy Hilfiger recently announced that it is looking to acquire labels to increase overall sales, while Kellwood Cos. agreed to acquire Kasper ASL, a bankrupt women's clothing and accessories company.
This past spring, Liz Claiborne Inc. completed the purchase of the stock of Travis Jeans, Inc., which owns the assets comprising trendy label Juicy Couture.
The deal calls for VF to pay Nautica shareholders $17 a share in cash. The company will also pay about $14.6 million after taxes to cash out employee stock options.
The deal is expected to soothe anxious Nautica shareholders, who have been increasingly disappointed with the company's performance. Nautica announced last month that it was in merger discussions, as it grappled with a dissident investor group called Barington Cos. Equity Partners, which owns 3.1 percent of the company. Barington was seeking to replace two of Nautica's board directors, noting that the board lacked representation from a sufficient number of independent and experienced directors.
After enjoying robust growth in the 1990s, Nautica, along with Tommy Hilfiger and other labels, has seen anemic sales at department stores, in an increasingly competitive environment.
Meanwhile, adding Nautica's label will enhance VF's product mix with men's tailored clothing, dress shirts, accessories, fragrances, eyewear, watches and home furnishings. Nautica will benefit from VF's supply chain, inventory and brand management capabilities, McDonald said.
"It provides us with a new platform for profitable growth and we're excited about the future potential we see for the brand," he said.
VF said it plans to expand Nautica's businesses as well as the company's Earl Jeans businesses. VF also said it aims to develop a new Nautica women's sportswear line.
The boards of both companies have approved the deal, which now requires the approval of Nautica's shareholders. VF expects the merger to be completed in the fourth quarter of 2003.
VF made a separate agreement with Nautica vice chairman David Chu to buy out his right to receive half of the net royalty income from licensing the Nautica trademark. VF will pay Chu $38 million upon the closing of the transaction, expected this fall, and $33 million on each of the third and fourth anniversaries of the closing.
Nautica earned $20.7 million in the year ending in February on sales of $694 million.
VF reported a loss of $154.6 million in 2002 on sales of $5.08 billion.
VF last month slashed its second-quarter earnings and sales outlook. The company said earnings per share could fall 20 percent to 25 percent for the three months ended July 5 and sales could be down 5 percent to 7 percent from a year ago. VF, which also makes JanSport and The North Face sportswear and Lily of France intimate apparel, blamed slow retail sales.
Nautica will keep its headquarters in New York City and its distribution center in Martinsville, Va.