Why Warnaco Shares Skyrocketed

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.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2087596, ~/Articles/ArticleHandler.aspx, 4/17/2014 2:30:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement