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.

VF''s other businesses include sportswear and imagewear, with brands like Lee and Wrangler jeans, Eagle Creek outdoor wear and Nautica clothing. Lee and Wrangler jeans are priced far below Seven jeans, and their positioning in the premium consumer segment is one of the factors behind the decision. The other is that the premium denim brand has operating margins of over 20 percent. Seven For All Mankind can grow to some 100 stores over the next 10 years under VF management. Some 27 percent of Seven for All Mankind''s business is international, primarily in Europe.

Lucy Activewear has about $57 million in revenue, and is expected to make a small loss this year. VF is paying $110 million for the women''s wear brand, which operates 50 stores in the United States and also has a direct-to-consumer business. The Lucy acquisition represents the first time VF has acquired a pure retailer rather than an apparel wholesaler.

VF believes it can lower Lucy''s sourcing costs, using its outsourced infrastructure in Asia. It plans to open 20 Lucy stores a year, to add another 200 stores in 10 years. Lucy is presently owned by private equity and venture capitalist firms, including Lone Pine Capital, Maveron LLC, Oak Investment Partners and Sutter Hill Ventures. Women''s wear retailer Chico''s FAS holds a minority stake in the Portland, Oregon-based business. Both of VF''s purchases are expected to close in August.