Though split signifies growth, consolidation seems to be the buzzword in the international fashion industry. The recent one is the acquisition of Tommy Hilfiger, one of the most recognised designer apparel groups, by Phillips-Van Heusen, one of the largest apparel companies.
Phillips-Van Heusen Corporation announced a definitive agreement for Phillips-Van Heusen to acquire Tommy Hilfiger BV, which is controlled by funds affiliated with Apax Partners LP, for total consideration of euro 2.2 billion (approximately $3.0 billion) plus the assumption of euro 100 million in liabilities. The consideration includes euro 1.924 billion in cash and euro 276 million in Phillips-Van Heusen common stock. The combination will create one of the world?s largest and most profitable apparel companies?a global business with a combined revenue of approximately $4.6 billion.
Phillips-Van Heusen finds Tommy Hilfiger a best fit because of its strong brand image, superior management, high profitability and international growth focus. Tommy Hilfiger?s strong growth in Europe and increasing presence in Asia will help Phillips-Van Heusen to reach newer international markets and to create a stronger foothold for the existing ones. This will
also help Phillips-Van Heusen boost its profits. Another gain will be in the form of expansion of its portfolio. At present, Phillips-Van Heusen owns and markets the Calvin Klein brand worldwide. For a company that is into shirts and neckwear, entering into acquisitions of such a nature is nothing but essential.
Phillips-Van Heusen markets a variety of goods under its own brands, Van Heusen, Calvin Klein, IZOD, Arrow, Bass and GH Bass & Co. And then there is the variety that Phillips-Van Heusen markets under its licensed brands. These include Tommy Hilfiger, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Unlisted, A Kenneth Cole Production, MICHAEL Michael Kors, Sean John, Chaps, Donald J Trump Signature Collection, JOE Joseph Abboud, DKNY and Timberland.
The current deal will help tap newer market segments and expand into the designer wear market, which Phillips-Van Heusen has successfully grown since the earlier acquisition of Calvin Klein. Tommy Hilfiger will benefit in terms of its global evolution and also in terms of gaining financial support for its further expansion.
Phillips-Van Heusen has the reputation of being a successful ?brand builder?. This is evident from the performance of Calvin Klein post its acquisition by Phillips-Van Heusen. Also, Phillips-Van Heusen gives freedom to designers to work on their creations independently. It has a reputation for never interfering in designers? creative processes.
With a premium lifestyle brand portfolio that includes Tommy Hilfiger and Hilfiger Denim, The Tommy Hilfiger Group of Companies is one of the world?s most recognised designer apparel groups. The Group?s focus is designing and marketing high-quality menswear, womenswear, children?s apparel and denim collections. Through select licensees, the Group offers complementary lifestyle products such as accessories, fragrances and home furnishings. Tommy Hilfiger Group merchandise is available to consumers worldwide through an extensive network of dedicated retail stores, leading specialty and department stores and other carefully controlled distribution channels. From the outside, this deal does not signify a significant change for the company, as it is so structured that the culture and personnel of Tommy Hilfiger will remain basically unchanged. What will change will be the inner dynamics and the balance sheets. Phillips-Van Heusen?s deep roots will be instrumental in expanding Tommy Hilfiger in the US.
Tommy Hilfiger?s current sourcing arrangements with Hong Kong-based Li & Fung will remain unchanged despite Phillips-Van Heusen operating its own buying offices. Sourcing teams will look out for consolidation opportunities on freight and related aspects.
All these developments do not affect the Indian market much as of now. Both the Phillips-Van Heusen and Tommy Hilfiger brands have separate arrangements as far as their presence in India is concerned. Though Tommy Hilfiger is a relatively new entrant to the Indian market, its brand recall is very high as compared to Phillips-Van Heusen, which has had a presence in our market for a much longer time.
In my opinion, Indian designers have many a lesson to learn from the successful growth of Calvin Klein and Tommy Hilfiger. As we are nearing another fashion week, can they identify what is necessary to create a successful business?
?The author is chairperson of the department of fashion management studies and head of fashion entrepreneurship at NIFT