Tuesday, July 8, 2003

Maker of Lee, Wrangler jeans agrees to buy Nautica

The Associated Press

CHARLOTTE, N.C. - VF Corp. agreed Monday to buy high-end clothing company Nautica Enterprises Inc. for almost $586 million, a move expected to add more cache to its repertoire of brands.

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 Thursday's closing price of $13.19 for Nautica shares. The stock has traded between $8.06 and $14.78 in the past year.

"We're pleased to say Nautica fits perfectly," said Mackey McDonald, chairman, president and chief executive of VF Corp., which has made no secret that it was in the market for key acquisitions.

"We've been interested in Nautica for a number of years," he said.

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 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.

Nautica chairman and chief executive officer Harvey Sanders said his company "brings a great deal to this merger."

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.

Investors seemed pleased with the news, sending shares of Nautica up more than 27 percent, or $3.59, to close at $16.78 on the Nasdaq Stock Market. On the New York Stock Exchange, VF Corp.'s shares were up $1.55, more than 4 percent, to close at $35.59.

The deal is expected to soothe anxious Nautica shareholders, who have been increasingly disappointed with the company's performance. Nautica announced last month 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.

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.

Nautica will keep its headquarters in New York City and its distribution center in Martinsville, Va.

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