Li & Fung Ltd. said it agreed to buy nearly all the assets of U.S. children's wholesale apparel designer and marketer Wear Me Apparel LLC, which does business as Kid's Headquarters. The Hong Kong-based company paid as much as $401.8 million in a move to further expand in the U.S. market.
The deal with Wear Me Apparel, which had net sales of $700 million last year, is Li & Fung's biggest acquisition since 2001.
“The price, because of this market…is one of the best deals we've done to date,” Li & Fung President Bruce Rockowitz said, adding the company first considered acquiring Wear Me's business three years ago, but the price at the time was four to five times the amount it has agreed to pay now. The deal underscores the attractive merger and acquisition opportunities in the aftermath of the global financial crisis, he said.
Wear Me Apparel, which operates as Kids Headquarters, is a designer, marketer and seller of young men's and children's apparel in the U.S. The company also manages a portfolio of licensed brands and private labels.
Li & Fung, which sources products for U.S. retailers such as Abercrombie & Fitch Co. and Kohl's Corp., in recent years has been keen on expanding beyond its core sourcing operations and into higher-margin businesses in segments such as retail and brand licensing.
Rockowitz said he expects Li & Fung to announce more acquisition deals this year and early next year. The deals are expected to mainly be in the U.S. and Europe, and involve the clothing, health and beauty segments as well as outsourcing agreements.
“We are now coming out of a recession…so I think people have a little bit more confidence to do a transaction now,” he said.
Li & Fung said in March it planned to spend $1 billion on acquisitions in 2009. The company's large war chest was boosted by earlier fundraising deals, including $500 million raised through a share placement in 2008.
“We have a very big capacity to do a number of acquisitions,” Mr. Rockowitz said.
As part of the deal, Li & Fung will first pay Wear Me Apparel a fixed amount of $101.8 million for the children's apparel assets. It also agreed to pay a performance-based sum of as much as $300 million over five years if certain earnings thresholds are met.
