VF Corporation has signed definitive agreements to acquire Seven For All Mankind, LLC and lucy activewear, inc. The two companies will form the foundation of a new lifestyle brand-based coalition, VF Contemporary Brands, which VF intends to build with additional contemporary brands over time. With approximately $57 million in annual revenues, Portland, Oregon-based lucy is sold through a base of 50 owned retail stores and online.
Upon closing these transactions, VF will name Mike Egeck as President of VF Contemporary Brands, in addition to his current role as Chief Executive Officer of Seven For All Mankind, reporting to Eric Wiseman, President and Chief Operating Officer of VF Corporation. Mike Edwards, current Chief Executive Officer of lucy, and his team in Portland will continue to lead the business. Once the acquisition is completed, Edwards will report to Mike Egeck.
“We have long viewed the women's activewear space as an ideal growth opportunity for VF, and lucy® is exactly the right brand for us,” said Wiseman. “It has an intensely loyal consumer following, superior product design and development capabilities and tremendous opportunities for future growth through continued expansion of a proven retail store strategy.”
“Our ability to identify, acquire and grow brands has been a key driver of shareholder value over the past several years, and we're clearly maintaining this momentum,” said Mackey J. McDonald, Chairman and Chief Executive Officer. “The acquisition of these high growth, high potential brands marks another milestone in the continuing success of our Growth Plan. These brands extend our reach to important and growing consumer segments, broaden our presence in healthy and growing channels of distribution, provide us with additional vehicles to expand our direct-to-consumer business through owned retail stores and online sales and offer the potential for continued growth internationally.”
Added Wiseman, “The formation of the VF Contemporary Brands coalition, with over $350 million in annual revenues, marks our commitment to building new platforms for sustainable growth. We will invest in the potential of both the 7 For All Mankind® and lucy® brands, and also plan to acquire other brands that will enhance the portfolio of this new coalition.”
Based in Los Angeles, 7 For All Mankind® is a leading premium denim-lifestyle brand, sold in luxury retail stores and high end specialty boutiques and online at www.7forallmankind.com. With current annual revenues of approximately $300 million, the brand has enjoyed rapid growth since it was launched in 2000.
Current Chief Executive Officer Mike Egeck will continue to lead the Seven For All Mankind business from its headquarters in Los Angeles. Prior to joining Seven For All Mankind in mid-2006, Egeck served as President of VF's Outdoor – Americas business. Seven For All Mankind Chairman Peter Koral will continue to act in an advisory capacity.
“There is no better steward for the future of 7 For All Mankind® than VF,” said Koral. “They understand and respect our brand's culture; at the same time, we will benefit from VF's scale, resources and global reach, which will enable us to take the brand to an entirely new level. We eagerly look forward to working together to fully capture the potential of this premier brand around the world.”
Commented Edwards, “VF has demonstrated its ability to successfully build and acquire strong lifestyle brands, at the same time ensuring that each brand's unique culture remains intact. We're enthusiastic about the prospects for continued growth in building the lucy® brand into a global leader in women's activewear. We both share a passion and commitment to our customers, and with our synergies we will take our brand experience to a new level. The entire lucy team could not be more excited to be part of the VF family.”
Subject to completion of the two transactions, VF's new Contemporary Brands coalition will have annual revenues of over $350 million, based on expected combined 2007 annual revenues of the two brands. Reflecting the high growth potential for both the 7 For All Mankind® and lucy® brands, Contemporary Brand's revenues should increase at a 15 to 20% annual rate over the next five years. In 2007, the coalition is expected to contribute approximately $125 million to total revenues, reflecting a partial year of ownership of both brands. Accordingly, VFC now expects total revenues in 2007 to be up by over 14% in 2007, compared to the 12% previously anticipated. The impact on 2007 earnings per share is expected to be neutral, with five cents to 10 cents accretion expected in 2008.
VF has agreed to pay $775 million for Seven For All Mankind, LLC and $110 million for lucy activewear, inc. The acquisitions will be financed through existing cash, borrowings under its existing credit facility and the placement of long-term debt. Both acquisitions are subject to receipt of customary government approvals and other customary conditions and are expected to be completed by the end of August.