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Calvin Klein to Sell His Company

Phillips-Van Heusen to purchase the trophy for over $700 million

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Fashion designer Calvin Klein has announced that he will sell the company that bears his name to Phillips-Van Heusen Corp. (New York), the country's biggest shirtmaker.

The deal will be for $400 million in cash, plus $30 million in stock and up to $300 million in royalties, linked to revenues over the next 15 years.

Phillips-Van Heusen plans to introduce a new Calvin Klein men's sportswear line, to compete with the more moderately priced Lauren line by Ralph Lauren, and with the Jones New York labels. The new men's line will be produced by Van Heusen and will be marketed in 2004; the company also plans to coin some new licenses, most likely to include a similarly lower-priced women's sportswear line, and perhaps some new accessories lines.

“We're buying it as a growth vehicle,” said Phillips-Van Heusen ceo Bruce Klatsky.

Klein will stay on with the new company, acquiring the financial resources to further expand his name in Asia and Europe. The purchase will also free the designer to worry more about aesthetics, he said, and less about production and bookkeeping.

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Klein said, “I have both an emotional and a financial long-term interest; I spent my life building this company. What I want now is growth.”

According to The New York Times, fashion industry sources say that while Klein — who has just turned 60 — has diminished his role in the actual design of his collections (much like other older designers like Ralph Lauren), he is still active, especially in styling his fashion shows and ensuring that the “Calvin Klein” look — a minimalist mix of jerseys and body-defining lush materials — still gets fashion buzz.

The Calvin Klein name is one of the world's most recognizable brands, and Klatsky said he is considering changing the 126-year-old Van Heusen name to Calvin Klein Inc. The deal includes the design house and a series of Calvin Klein licenses, including jeans, sheets, eyeglasses and perfume, as well as a non-expiring license for Calvin Klein underwear, owned by Warnaco. While many of the company's licenses have specific expiration dates, the Warnaco license for underwear will run forever. But the $300 million in potential incentives to Mr. Klein include performances of all the licensees.

Phillips-Van Heusen is the dominant shirtmaker in the United States. Besides the Van Heusen brand, the company owns Izod and G. H. Bass. In addition, it has licensing agreements to make shirts for Arrow shirts, Geoffrey Beene, DKNY, Kenneth Cole and, starting next summer, for Calvin Klein. Right now, the $1.5 billion company is known more as a moderate-price player, with a recent appetite for acquisitions, driven by Klatsky, who has worked for Van Heusen for 30 years, the last five as ceo.

Yesterday's deal seems to have answered the one big question for Klein: “Would he be able to find a buyer he likes, and still be able to retain complete design control over his empire?” Last night, the answer was clear: “No.” “He's not going to have complete design control,” said Klatsky, “but we'd be idiots not to respect his opinions and we'll absolutely pay attention to what he has to say.”

The Calvin Klein “machine,” a system that includes design directors and merchandisers, will continue to function, Klein added, but said he would continue to be active in “the creation of product, of strategizing new businesses and marketing.”

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Klein will have no title in the new organization. “In the end,” said Klatsky, “Phillips-Van Heusen will own 100 percent of Calvin Klein Inc.”

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