Phillips-Van Heusen to buy Hilfiger for $3 billion

NEW YORK (Reuters) - Apparel company Phillips-Van Heusen agreed to buy fashion brand Tommy Hilfiger from London-based Apax Partners in a cash and stock deal for about $3 billion to boost its presence in Europe and Asia.

The deal, which sent PVH shares up 12 percent, marks an end to private-equity firm Apax's plans for an initial public offering for the iconic brand which it had bought in 2006 for $1.6 billion.

Private equity firms have been increasingly able to exit investments as the economy and markets have stabilized. Taking companies public, however, has been one of the more problematic exit routes, with some recent plans by some firms dashed.

Apax has made 4.5 times its original investment on the deal and will hold about 7 pct of the stock in the enlarged company, a source familiar with the situation said.

Phillips-Van Heusen, owner of brands like Calvin Klein and Izod, expects the deal to boost earnings by 20 cents to 25 cents a share, excluding items, in the current fiscal year. It also sees a profit boost of 75 cents a share to $1.00 a share in the next fiscal year ending January 29, 2012.

"Tommy Hilfiger fits all of our acquisition criteria: a strong brand, superior management, highly profitable, immediately accretive to earnings, and focused on international growth," Phillips-Van Heusen CEO Emanuel Chirico said.

Tommy Hilfiger has spent the last few years trying to undo the damage from its apparel brand going too mainstream, and is now presenting an iconic American brand.

The brand is expanding faster abroad than in the United States, where it suffered years of sales declines after its logo-heavy designs and affordable prices made it a staple of urban streetwear but alienated many of its more affluent customers.

DEAL TERMS

The deal value includes a cash component of $2.6 billion and $380 million in Phillips-Van Heusen common stock.

Phillips-Van Heusen expects to use $3.05 billion debt, $385 million cash at hand, $200 million perpetual convertible preferred stock and $200 million from a common stock offering to finance the deal and refinance certain other debt.

Phillips-Van Heusen sees annual cost savings of $40 million from the deal and expects to close it in the second quarter.

After the deal, Tommy Hilfiger will remain in his role as principal designer and visionary for the namesake brand and Fred Gehring will continue as CEO of Tommy Hilfiger. Gehring will also take on the role as CEO of PVH's international operations, and join the PVH board.

Peter J. Solomon Co is the lead financial adviser to PVH. Barclays Capital, Deutsche Bank, Bank of America Merrill Lynch, and RBC Capital Markets also acted as financial advisers and will arrange financing for the deal.

Credit Suisse acted as lead financial adviser to the Tommy Hilfiger Group and as sole adviser to Apax Partners.

(Reporting by Dhanya Skariachan; Additional reporting by Simon Meads in London and Megan Davies in New York; Editing by Derek Caney, Dave Zimmerman)

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