V.F. Corporation (VFC), a global leader in branded lifestyle apparel, in an effort to expand the portfolio of its brands, recently announced that it has finally concluded the acquisition of Rock and Republic Enterprises Inc. for a value of approximately $57.0 million.
With this acquisition, the company has made its first deal for VF’s Licensed Brands group, which was formed in July 2009. The company will provide details related to its licensing plans in future.
As per the agreement, V.F. Corp. has only acquired the trademarks and intellectual property of Rock and Republic. The business operations and retail store of the company do not form a part of the acquisition. The acquisition is expected to enable V.F. Corp to compete in the premium-denim space dominated by Los Angeles designers.
Prior to this transaction, Rock and Republic had filed a petition for bankruptcy protection in a bankruptcy court in New York in April 2010 with the aim of lightening its liabilities. The loan of $15 million from Los Angeles apparel executive Richard Koral, whose repayment was due on April 2, 2010, compelled the company to file such a petition. Richard Koral is the only secured creditor of the company. Besides, unsecured creditor loan is more than $15 million.
The company’s policy to acquire businesses with global growth opportunities and exit businesses having less potential, has transformed V.F. Corp., creating a strategic balance, to drive growth and improve profit.
V.F. Corp. is a global leader in branded lifestyle apparel with more than 30 brands, including Wrangler, The North Face, Lee, Vans, Nautica, 7 For All Mankind, Eagle Creek, Eastpak, Ella Moss, JanSport, lucy, John Varvatos, Kipling, Majestic, Napapijri, Red Kap, Reef, Riders and Splendid.
Moreover, V.F. Corp.’s diversified brand portfolio positions the company well above its peers, to generate above average industry growth and sustain itself in the current challenging environment. The company’s approach to brand management allows each brand to expand further through rigorous marketing strategies, financial control and operating leverage.
Further, given the strength of many of its brands and opportunities with regard to distribution, the company is set for significant long-term growth.
Considering the apprehensions about stringent consumer spending and presence of strong competitors across the globe, such as Polo Ralph Lauren Corp. (RL) and Sears Holdings Corporation (SHLD), we are compelled to maintain our ‘Neutral’ recommendation on V.F. Corporation in the long run.
With the expectation that the stock will perform in line with the broader U.S. equity market, VF currently has a Zacks #2 Rank, implying a short-term ‘Buy’ rating on the stock.
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