October 31, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of apparel distributor Warnaco Group (NYSE: WRC ) soared 38% today, after larger peer PVH (NYSE: PVH ) offered to acquire it for about $2.9 billion.
So what: The cash-and-stock deal values Warnaco at roughly $68.43 per share -- $51.75 in cash, and a portion of PVH's stock -- and represents a healthy 34% premium over its closing price on Friday. PVH is making the move to solidify control of the prestigious Calvin Klein brand -- Warnaco sells Calvin Klein jeans and underwear under a license -- and judging by its own stock's 17% surge today, Wall Street seems thrilled with the price being paid to do it.
Now what: The deal should close early next year and is expected be accretive to PVH earnings in the first full year after that. According to PVH Chairman and CEO Emanuel Chirico:
Having direct global control of the two largest apparel categories for Calvin Klein -- jeans and underwear -- will allow us to unlock additional growth potential of this powerful designer brand across all major product categories, geographies and distribution channels.
So, while Warnaco shares are likely all popped out, PVH's newly bolstered global scale might be a driver of market-topping gains going forward.
Interested in more info on Warnaco? Add it to your watchlist.