Warnaco Soars on PVH Buyout; Stock Up More Than 37%

Warnaco Group WRC is one of the top gaining stocks on the New York Stock Exchange Wednesday after the retail conglomerate agreed to be acquired by PVH Corp. PVH in a $2.9 billion deal. Around mid-day, WRC was trading up a little less than 38 percent to $70.00. PVH has also gotten a big boost in the wake of the deal and was last up around 17 percent to $106.90. Warnaco shareholders will receive a combination of cash and stock in the transaction. According to the terms of the deal, Warnaco shareholders will be paid $51.75 in cash for each share they hold and the rest of the purchase price will be in PVH stock. The total per-share value of the acquisition is $68.43. Currently, Warnaco is trading slightly above the deal value suggesting that the market believes there is a slight possibility that another bidder could emerge. The deal will create one of the world's largest clothing companies with numerous prominent brands operating under the combined entity. Warnaco's brands include Speedo, Chaps, Warner's and Olga. PVH, formerly known as Phillips Van Heusen, owns Calvin Klein, Tommy Hilfiger, IZOD, Bass, and ARROW among others. The acquisition will give PVH full-control over the Calvin Klein brand, as Warnaco sells Calvin Klein jeans and underwear, the brand's two largest categories, under a license. The deal is the second large acquisition by PVH in as many years. In 2010, the company purchased Tommy Hilfiger for $3 billion. "This is a unique opportunity to reunite the 'House of Calvin Klein' and reinforces our strategy to drive the global growth of Calvin Klein," PVH Chairman and CEO Emanuel Chirico said in a statement. The transaction has been unanimously approved by both companies' board of directors and is expected to close in early 2013. Warnaco's CEO, Helen McCluskey, is expected to join PVH's board upon completion of the transaction. PVH said that it expects the acquisition to be accretive to its earnings in the first full-year after it is completed. Last year, PVH reported revenues of roughly $5.766 billion. Warnaco's sales were $2.513 billion and the combined company is expected to generate total revenue of more than $8 billion annually. Over the last 5 years, Warnaco's revenues have been moving steadily higher with a very slight down tick in fiscal 2010. PVH's revenues exploded higher in fiscal 2011 and 2012 after its acquisition of the Tommy Hilfiger brand. Last year, PVH reported net income of just under $318 million while Warnaco's net income was under around $127.5 million.