PVH and Gazal Announce Expansion of Australian Joint Venture
NEW YORK & SYDNEY–(BUSINESS WIRE)–Dec. 19, 2014– PVH Corp. (NYSE:PVH) and Gazal Corporation Limited (ASX:GZL) announced today that, through wholly owned subsidiaries, they had entered into an agreement with their Australian joint venture to add businesses to the joint venture, significantly expanding its scope.
The transaction, which is expected to close in early February 2015, will add the Tommy Hilfiger, Van Heusen and Nancy Ganz businesses in Australia and New Zealand to the joint venture, as well as certain of Gazal’s other shirting, tailored and shapewear businesses.
PVH and Gazal’s 50/50 joint venture, PVH Brands Australia Pty Limited, commenced operations in February 2014, with its entry into a license and distribution agreement with Calvin Klein, Inc., a wholly owned subsidiary of PVH, for Calvin Klein Jeans and Calvin Klein Underwear in Australia, New Zealand and the rest of Oceania.
Under the agreement announced today, the JV will:
- Enter into a license and distribution agreement with Tommy Hilfiger Europe B.V., a wholly owned subsidiary of PVH, for Tommy Hilfiger in Australia and New Zealand. The JV will also acquire certain assets of the existing wholesale and retail Tommy Hilfiger business in Australia, including 12 stand-alone retail stores. The license and distribution agreement has a 12-year term.
- Acquire Gazal’s shirting, tailored and men’s accessories business, which is conducted under PVH’s Van Heusen and Calvin Klein brands, as well as Gazal’s owned and licensed Bracks, Pierre Cardin and Paramount brands. Gazal currently distributes the Van Heusen brand, the Australasian businesswear leader, under license from PVH. The current license agreement will be transferred to the JV and extended to December 31, 2033.
- Acquire Gazal’s shapewear business, which consists of the Australian and New Zealand rights to Nancy Ganz, the Australasian market leader in this category, as well as the right to distribute the Spanx brand in Australia and New Zealand under license from Spanx, Inc., and Gazal’s own HoldmeTight brand. The JV will also enter into a perpetual license with PVH for Nancy Ganz for all territories outside of Australia and New Zealand.
“Australia is an important destination for Tommy Hilfiger. This arrangement enables us to more directly support the development and expansion of the Tommy Hilfiger retail and wholesale businesses, as we continue to establish Tommy Hilfiger as a premium lifestyle brand in the region,” said Daniel Grieder, CEO of Tommy Hilfiger.
“The expansion of our joint venture with Gazal allows us to consolidate all our branded businesses in the Australasian market with one strong local partner,” said Manny Chirico, Chairman and CEO of PVH. “We believe that our joint venture is the best way to leverage the opportunities in the market and drive growth of our Calvin Klein, Tommy Hilfiger and Van Heusen brands in this part of the world.”
“We have great respect for PVH and are excited to be expanding our joint venture with them. Together, we have developed some dynamic growth plans for each brand in this market and we now look forward to the implementation phase,” said Gazal’s Executive Chairman, Michael Gazal.
Certain additional details about the financial effect of these transactions on Gazal are provided at the end of this announcement, in accordance with Gazal’s Australian disclosure requirements.
About The Tommy Hilfiger Group
With a premium lifestyle brand portfolio that includes Tommy Hilfiger and Hilfiger Denim, the Tommy Hilfiger Group is one of the world’s most recognized designer apparel groups. Its focus is designing and marketing high-quality menswear, womenswear, children’s apparel and denim collections. Through select licensees, the Group offers complementary lifestyle products such as sportswear for men, women, juniors and children; footwear; athletic apparel (golf, swim and sailing); bodywear (underwear, robes and sleepwear); eyewear; sunwear; watches; handbags; men’s tailored clothing; men’s dress furnishings; socks; small leather goods; fragrances; home and bedding products; bathroom accessories; and luggage. The Hilfiger Denim product line consists of jeanswear and footwear for men, women and children; bags; accessories; eyewear and fragrance. Merchandise under the Tommy Hilfiger brands is available to consumers worldwide through an extensive network of Tommy Hilfiger retail stores, leading specialty and department stores and other select retailers and retail channels.
PVH Corp., one of the world’s largest apparel companies, owns and markets the iconic Calvin Klein and Tommy Hilfiger brands worldwide. It is the world’s largest shirt and neckwear company and markets a variety of goods under its own brands, Van Heusen, Calvin Klein, Tommy Hilfiger, IZOD, ARROW, Warner’s and Olga, and its licensed brands, including Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors, Sean John, Chaps, Donald J. Trump Signature Collection, DKNY, Ike Behar and John Varvatos.
Based in Sydney and listed on the Australian Securities Exchange, Gazal Corporation is a leading apparel supplier and retailer in Australasia, marketing both company owned and licensed brand names such as Calvin Klein, Van Heusen, Bisley, Nancy Ganz, Spanx, HoldmeTight, Bracks, Pierre Cardin, Midford and Trade Secret.
Certain additional financial details in relation to Gazal
Under the transaction, each party will make a further equity subscription in the JV of A$45.5 million which in the case of Gazal, it will satisfy by transferring to the JV its shirting, tailored and shapewear businesses at a value of A$33.6 million and making a cash subscription of A$11.9 million. The cash component of A$11.9 million will be funded from Gazal’s existing cash balances and debt facilities and will be used by the JV to fund working capital and other requirements. The transaction is subject to customary completion adjustments applicable to both PVH and Gazal. In any event, PVH and Gazal will continue to have a 50/50 interest in the JV following completion of the transaction.
As at June 30, 2014, the carrying value of the assets of the shirting, tailored and shapewear businesses which correspond to those to be transferred by Gazal to the JV was A$11.7 million. These assets at the time of transfer are expected to be between A$11.8 million and A$12.8 million.
This transaction will increase Gazal’s investment in the JV from A$6.4 million to A$51.9 million before transaction costs. Subject to transaction costs and completion adjustments, Gazal expects to recognize a pre-tax profit on the sale of these businesses and an increase in net assets of between A$20.8 million and A$21.8 million.
As part of the transactions, Gazal will receive ongoing services fees from the enlarged JV for the provision of administration services, partnering (management) services and office and warehouse space.
In the financial year ended June 30, 2014 Gazal’s shirting, tailored and shapewear businesses recorded sales of A$46.9 million and net profit after tax of A$3.6 million. While these transactions will see ownership of Gazal’s shirting, tailored and shapewear businesses transfer to the JV, Gazal will hold a 50% interest in the substantially enlarged business of the JV resulting from these transactions. Gazal expects that from FY2016 the enlarged business of the JV will result in a net contribution to Gazal’s reported earnings in excess of the current contribution of the shirting, tailored and shapewear businesses.
PVH CORP. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements made in this press release, including, without limitation, statements relating to PVH Corp.’s future plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation (i) the Company’s plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the levels of sales of the Company’s licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company’s licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, and other factors; (iii) civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and labor instability in any of the countries where the Company’s licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; (iv) disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers limit or cease shopping in order to avoid exposure or become ill; (v) the failure of the Company’s licensees to market successfully licensed products or to preserve the value of the Company’s brands, or their misuse of the Company’s brands and (vi) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.
The Company does not undertake any obligation to update publicly any forward-looking statement, whether as a result of the receipt of new information, future events or otherwise.
Source: PVH Corp.