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NEW YORK – Tommy Hilfiger Corp.’s sale to Apax Partners for $1.6 billion is a deal that can trace its roots to informal discussions during board meetings four years ago, when the directors hashed out the future prospects of the company.
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Their goal was to “maximize shareholder value,” according to a recent filing with the Securities and Exchange Commission. The filing also revealed that on two occasions, in 2002 and in 2003, Tommy Hilfiger Corp. was approached by companies looking to buy or merge with it. But the discussions of a sale of the company were put on hold when Tommy Hilfiger Corp. was issued a grand jury subpoena, which led to a federal investigation regarding its buying commissions. Last year, the company signed a non-prosecution agreement with federal investigators, settling the matter.
“In December 2002, the chief executive officer of a major apparel company had a meeting with Joel Horowitz, the then chief executive officer of the Company, and Mr. Hilfiger in which he expressed interest in a potential business combination,” the SEC filing stated. “In February 2003, during a meeting with Mr. Horowitz, the chief executive officer of the apparel company expressed a more concrete interest in acquiring the Company. After signing a confidentiality agreement, the apparel company met with senior management of the Company and was provided with the Company’s financial projections for the following fiscal year. In early March 2003, the chief executive officer of the apparel company orally conveyed to Mr. Horowitz an interest in acquiring the outstanding shares of the Company at a purchase price equal to $10.00 per share in cash.”
The board later decided the price was too low. But it didn’t take long for someone else to come knocking on the door.
“In April 2003, the Company received a proposal from another party to contribute one or more apparel businesses and cash to the Company in exchange for a significant equity stake in the Company,” the SEC filing stated. “As part of this proposal, the third party also contemplated that the Company would undertake a substantial share buyback through a Dutch auction self tender offer.”
Again, that deal went no where. By September of 2004, the federal investigation began, and talks of a sale or merger would have to be put on the back burner.
Still, the company kept looking to grow its business, it “continued to explore smaller acquisitions, and consummated the purchases of the Karl Lagerfeld business in January 2005 for $27.5 million and the rights to distribute and manage the sale of Tommy Hilfiger products in Italy in April 2005 for $22 million,” the filing stated. “During this period, the Company determined not to pursue larger acquisitions to effect its multi-brand, multi-channel business strategy.”
Meanwhile, Fred Gehring, chief executive officer of Tommy Hilfiger Europe B.V., a subsidiary of the company, “had several conversations with Mr. Hilfiger to express his interest in acquiring the Company.”
To read more details on the background of the acquisition of Tommy Hilfiger Corp., download an excerpt of the SEC filing in the PDF below.