VF Corp. (VFC), the world’s largest apparel maker, climbed the most since 2008 in New York trading after agreeing to buy hiking-boot company Timberland Co. (TBL) for about $1.8 billion.
The per-share price is $43, the companies said today. VF will pay about 12 times Timberland’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That compares with the 9.7 median multiple in nine shoe and clothing deals since 2006.
The acquisition, the biggest in VF’s 112-year history, will push its sales of outdoor and sports gear to more than half the total, which reached $7.7 billion last year. The maker of Wrangler jeans plans to cut costs at Timberland and boost the brand’s revenue by 10 percent annually by expanding in Europe and China, executives said on a conference call today.
“They’re doubling down on the lifestyle brands which typically have higher growth rates,” said Sarah Henry, an analyst for Manulife Asset Management in Berwyn, Pennsylvania. “It’s a good fit and going to boost earnings, which is driving the stock.” Her firm oversaw about $217 billion, including VF shares, through April.
VF, based in Greensboro, North Carolina, rose $9.21, or 10 percent, to $101.01 at 4 p.m. in New York Stock Exchange composite trading, the biggest gain since October 2008. Timberland advanced 44 percent to $43.20.
Increasing Profit
VF projected Timberland will boost per-share profit by 25 cents this year and 75 cents in 2012. Analysts anticipate profit of $7.25 this year, according to the average of estimates in a Bloomberg survey. They predict $8.03 in 2012.
Timberland may add as much as $2 a share in profit by 2015, Chairman and Chief Executive Officer Eric Wiseman said in a telephone interview.
The acquisition price is 43 percent more than Stratham, New Hampshire-based Timberland’s closing price June 10. Last month, Timberland’s shares fell the most in more than 23 years after increasing costs for labor, materials and transportation ate into profit.
“Timberland has been our No. 1 acquisition priority,” Wiseman said on the call. “It knits together two powerful companies into a new global player in the outdoor and action sports space.”
Over the past five years, the buyers of more than 40 footwear makers paid an average premium of about 21 percent compared with the average price of 20 trading days before the deal’s announcement, according to Bloomberg data. VF agreed to pay a 36 percent premium on that basis.
Timberland Sales
The acquisition, the biggest in the footwear industry in at least five years, has an enterprise value of about $2 billion net of cash acquired. Scheduled to close in the third quarter, it will probably add about $700 million to VF’s revenue in 2011. Almost three-quarters of Timberland’s $1.43 billion in sales last year came from footwear such as hiking boots, while the rest came from apparel, accessories and royalties.
More than 100 retail company takeovers have been announced in North America over the past year, according to data compiled by Bloomberg. The value of deals is now about $27 billion, more than quadruple the amount a year earlier.
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