The potential acquisition of luxury label Tommy Hilfiger by fashion group Phillips-Van Heusen (PVH) could open up European markets for PVH, according to JP Morgan Equity Research.
PVH, which owns Calvin Klein and holds licences for Hilfiger as well as other luxury labels including Kenneth Cole New York, BCBG Max Azria and Timberland, is reported to be considering a bid for Tommy Hilfiger, whose owner Apax Partners is understood to be mooting a sale or flotation of the brand.
Christoper Kim, vice president, JP Morgan Equity Research, told WWD: “The opportunities to have revenue synergies are relatively compelling”, and added that because Hilfiger has a strong business in Europe, it would give PVH opportunities to distribute some of its brands here, as well as Asia.
In his research note, released yesterday, Kim wrote, “PVH has a strong track record for successful acquisitions (Calvin Klein, Superba), and we believe that management will not only be focused on long-term synergies and accretion, but also accretion in year one.”
Kim said that reports that have valued Hilfiger at $3bn (£2bn), which translates to an eight times EBITDA multiple, were “reasonable, in our view.”
He added: “Our scenario analysis assumes a nine times multiple of a $3.4bn (£2.3bn) valuation (enterprise value). Our scenario model assumes that 20% of this is financed via stock (to Apax) with the remainder via debt at an 8.5% interest rate.”
For the year ended March 31, 2009, Hilfiger generated $378m (£253) in EBITDA on sales of $2.2bn (£1.5bn).