NEW YORK — Guess Inc. and Fossil Inc. won’t be business partners after all.
The companies announced on Monday that they have ended discussions regarding a long-term licensing agreement under which Fossil would have manufactured and distributed timepieces for the Guess brand.
The firms said that talks broke down because they were unable to agree on final terms, and they dismissed speculation that a lawsuit against Fossil filed by Callanen International, the Timex Corp. unit that has made and distributed Guess watches since 1991, played into the decision.
“The lawsuit was a distraction, but not a deal-breaker,” said Mike Kovar, chief financial officer of Fossil, based in Richardson, Tex. “[The agreement] was an opportunity to combine two powerful names in the watch and fashion businesses, but it was a complex transaction with a lot of moving parts, and it just didn’t get done.”
WWD reported Aug. 26 that Fossil and Guess were near closing a deal under which Fossil would have taken over the women’s and men’s Guess-branded watch business for at least 10 years. The deal reportedly included a target of $125 million in annual wholesale volume and the creation of a separate firm within Fossil for the Guess business.
“The Guess business is still underpenetrated in many parts of the world,” said Carlos Alberini, president of Guess, based in Los Angeles. “That was one of the big reasons we initiated talks with Fossil. Fossil is well developed worldwide. It’s a big company with great global outreach. We love the people [at Fossil], and we saw a lot of positives in the relationship, but we spent a lot of time going through the negotiations process and we got to a point where we couldn’t agree.”
Callanen, which filed a suit against Fossil on Aug. 31 alleging that it violated antitrust laws, created unfair state competition and interfered with Callanen’s contractual relationship in regard to the proposed license deal with Guess, will continue to manufacture and distribute Guess watches until its contract expires Dec. 31, 2006.
Neither Guess nor Callanen would comment about whether the license would be renewed now that the deal with Fossil has fallen through. Cindy Livingston, president and chief executive officer of Norwalk, Conn.-based Callanen, said the Guess brand is “now back home where it belongs” and added that it was likely the suit against Fossil would be dropped.