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Bloomberg is reporting that private equity firm Apax Partners is close to a $3 billion deal to sell its Tommy Hilfiger brand to Phillips-Van Heusen Corp. (PVH).Given that Apax acquired the brand for $1.6 billion back in 2005 -- during a much more favorable market for the apparel industry -- the deal has to be considered a huge success. The size of the reported deal might seem surprising to followers of the American apparel industry, where the Hilfiger brand is well past its prime.
The story with Hilfiger is overseas. Back in October 2007, Apax was rumored to be planning an IPO for the Hilfiger brand. Obviously the market meltdown put a stop to those plans, but at the time, the Wall Street Journal reported that "Apax hasn't tried to revive the U.S. business. In fact, it closed stores here and let sales plummet by half in one year. It directed Hilfiger's capital expenditures toward opening swanky stores in Europe, where it can sell designer jeans for three times as much as the downmarket versions it sells in the States."
It's the European sales that explain the high valuation being applied to a brand that was once quintessentially American but has now been relegated to the bargain bin here.
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