VF on a shopping spree

31 July 2007

Clothing manufacturer VF Corp is to acquire upmarket jeans maker ''Seven'' and women''s activewear company Lucy Activewear for a combined $885 million. While Bear Stearns Merchant Banking owns denim designer company Seven For All Mankind LLC, Lucy Activewear Inc is held by private equity firms.

The Los Angeles-based Seven For All Mankind cost $775 million, tripling the original investment made by Bear Stearns Merchant Banking. A little more than two years ago, the firm invested a little under $100 million for a 50 per cent stake. The other half was owned by L''Koral Inc, a company controlled by Seven''s founder Peter Koral.

Seven jeans are sold at trendy boutiques and at luxury stores like Barneys New York, Neiman Marcus and Saks Fifth Avenue. The company is growing by 15 per cent annually, and generates $300 million in revenue. After its takeover by Bear Stearns, its earnings have increased by about 65 per cent, after the firm expanded organically, coming up with non-denim products like shirts and tops, a line of bags and a license for women''s and men''s shoes.

Seven For All Mankind''s first exclusive retail store will open in November.

In March 2006, Seven hired Mike Egeck as CEO. Earlier, Egeck headed the Greensboro, North Carolina-based VF''s outdoor-Americas division, which has brands like North Face.

That is probably why the deal went through so quickly. Egeck will now become president of VF''s newly formed contemporary brands business, which will have over $350 million in annual revenues. The two acquisitions should drive sales growth of 15 to 20 percent a year over the next five years.