January 7, 2011 / 1:45 PM / 7 years ago

UPDATE 2-Perry Ellis to buy Rafaella for about $70 mln

* Deal to boost Perry earnings by 40 cents/shr

* Expects deal to close by Jan. 28

* Shares up 14 percent

(Adds details, background, share move)

BANGALORE, Jan 7 (Reuters) - Perry Ellis International Inc (PERY.O) said it will buy Rafaella Apparel Group from Cerberus Capital Management [CBS.UL] for about $70 million as it looks to diversify and strengthen its presence in the women’s apparel market.

The Miami-based company will also issue warrants to purchase 106,564 common shares.

Perry Ellis shares were up 14 percent to $29.87 on Friday morning on Nasdaq -- their highest in more than three years.

The deal, a reversal in the recent trend of private equity buyouts of retailers, is expected to add about 40 cents to Perry’s earnings per share for the next fiscal year.

The retail sector has seen a slew of private equity deals recently as buyout firms have been under pressure to spend money before their investment periods end.

Children’s apparel retailer Gymboree Corp GYMB.O and fabric and crafts company Jo-Ann Stores Inc JAS.N were taken private recently, and there have been reports of possible private equity interest in Build-A-Bear (BBW.N) and Aeropostale Inc ARO.N. [ID:nSGE69A16C].

“This addition... will provide excellent cross-selling opportunities across our portfolio of brands and provides a larger foundation to support our current women’s brands Laundry by Shelli Segal and C&C California,” Chief Operating Officer Oscar Feldenkreis said.

Perry Ellis, which had been scouting for a womenswear brand for some time now [ID:nSGE6AG081], will finance the deal through its senior credit facility and cash on hand.

It expects the deal to close by Jan. 28.

In 2008, Perry Ellis -- about 90 percent of whose sales come from men’s business -- bought women’s wear lines C&C California and Laundry by Shelli Segal from Liz Claiborne Inc LIZ.N.

Rafaella, known for its sports and workwear sold through department stores, saw revenues of about $122 million for the trailing 12 month period ended Sept. 30.

Financo Inc will act as the lead advisor to Rafaella Apparel Group. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Joyjeet Das )

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