* VF will pay $43 per Timberland share, a 43 pct premium
* VF sees outdoor gear making up 60 pct of sales by 2015
* CEO says not done with dealmaking
* Timberland shares up 43 percent; VF up 9.4 percent
(Adds details from CEO interview, updates shares)
By Dhanya Skariachan and Phil Wahba
NEW YORK, June 13 VF Corp (VFC.N), owner of the
North Face clothing brand and chain, is buying footwear maker
Timberland Co TBL.N for $2 billion to boost sales of outdoor
gear, its biggest business.
The deal will help VF "build the premier portfolio of
outdoor brands," Chief Executive Eric Wiseman told investors on
Monday on a conference call, noting that Timberland was at the
top of a short list of targets VF drew up a year ago.
The deal values Timberland at $43 a share, a 43 percent
premium to its closing price of $29.99 on Friday on the New
York Stock Exchange.
Outdoor clothing, such as fleece vests and hiking pants,
was VF's fastest growing segment last quarter, with sales up 16
percent. The Timberland deal will complement that by vastly
beefing up VF's offerings of items such as hiking boots and
sandals. Footwear accounts for 75 percent of Timberland sales.
Wiseman told Reuters that VF was open to buying other
outdoor brands, particular those with strong international and
online businesses. "We're not done," he said.
VF's brands and store chains run the gamut from high-end
lines such as John Varvatos and 7 For All Mankind to moderately
priced lines such as Lee and Wrangler jeans.
But outdoor gear is at the heart of the company's growth
strategy. Earlier this spring, Wiseman said he wanted outdoor
gear to surpass 50 percent of sales by 2015. On Monday, he
raised that threshold to 60 percent.
(For a Breakingviews column on of the VF-Timberland deal,
VF expects the deal, approved unanimously by the boards of
both companies, to give earnings an immediate lift. It forecast
an extra 25 cents in earnings per share in 2011 and 75 cents in
2012, including deal-related expenses.
Timberland will add $2 to annual earnings per share by
2015, and add about $700 million to VF's 2011 revenue, VF
The companies expect the deal to close in the third
VF shares rose 9.4 percent to $100.43 in afternoon trading,
while Timberland shares were up 43.3 percent to $42.98.
HELPING TIMBERLAND MARGINS
Stratham, New Hampshire-based Timberland, with its namesake
label and brands such as Mountain Athletics and SmartWool,
expects 2011 revenue of $1.6 billion, more than half of it
Before the deal was announced, Timberland shares had
plummeted 34 percent from a 12-month high of $45.50 in early
May, when the company reported results well short of Wall
Street estimates and said it expected pressure on margins from
rising leather, transportation and labor costs.
"The price is fair," Susquehanna analyst Christopher Svezia
said. "At first blush, it seems a bit expensive, but I think
Timberland is definitely on the upswing in terms of their
Wiseman said VF's infrastructure overseas, where it gets 30
percent of its sales, would help lift Timberland's sales 10
Wiseman told Reuters that VF's expertise in clothing would
help Timberland to make its apparel more "relevant" and
therefore more profitable.
But he told investors it would take five years for
Timberland operating margins to match those of VF, which is
targeting a companywide operating margin of 15 percent by
VF plans to finance the acquisition through a combination
of cash on hand, commercial paper and term debt.
Timberland can solicit higher bids until July 26.
Timberland said in a regulatory filing it would pay VF a
termination fee of $87.2 million fee if it opts for a better
Law firm Ropes & Gray advised Timberland on the deal.
(Additional reporting by Viraj Nair in Bangalore; Editing by
Lisa Von Ahn, John Wallace and Steve Orlofsky)