Affordable deals tempt acquisitive apparel firms

By Alexandria Sage

LOS ANGELES (Reuters) - More consumers may be staying away from stores, but it's shopping season for many of the apparel makers and retailers, who are rummaging around the market in hopes of picking up rival brands or companies at knock-down prices.

Getting a valuable asset cheaply is clearly good news for the acquirer's shareholders, but such dealmaking could also benefit a seller looking to offload a division and redeploy the capital.

Mid- and small-cap companies such as VF Corp (VFC.N: Quote, Profile, Research, Stock Buzz), Iconix Brand Group Inc (ICON.O: Quote, Profile, Research, Stock Buzz), Warnaco Group Inc WRNC.O, Perry Ellis International Inc (PERY.O: Quote, Profile, Research, Stock Buzz) and Volcom Inc (VLCM.O: Quote, Profile, Research, Stock Buzz) say they have their eyes open and cash on hand to take advantage of lower valuations with stock prices in a slump.

"We're going to continue to be acquisitive with what's happening out there in the world today," Iconix Chief Executive Neil Cole told investors recently. "Our deal flow is as good as it's ever been."

But apart from a recent market sell-off, the deal activity is fueled by faith in the ultimate resilience of consumers, said Steven Reiner, managing director of boutique investment bank Financo Inc. Past clients include VF and Warnaco, which it advised in a recent $26 million sale of three swimwear brands.

"We're bullish on consumers long term, so we're bullish on our business," Reiner said.

Strategic buyers with cash now have an opportunity to "tuck in" smaller, complementary companies or brands, he said. Meanwhile, others are pruning their businesses to refocus, as with Liz Claiborne Inc's (LIZ.N: Quote, Profile, Research, Stock Buzz) sale of brands C&C California and Laundry to Perry Ellis for $37 million in cash.

The valuation of Liz Claiborne's stock tells the discount story: it was valued at 18 times earnings in mid-December and fell to a low of 12 times this month before climbing back up to 16 earlier this week.