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What PVH Gains From Selling Off Speedo

Looking to focus on its core brands with a big stake in the denim market, PVH Corp. has entered into a definitive agreement to sell its Speedo North America business to Pentland Group, parent company of Speedo International Limited, for $170 million in cash.

Speedo International licenses the Speedo trademark to a PVH subsidiary for perpetual use in North America and the Caribbean. That subsidiary will be sold to a Pentland subsidiary as part of the transaction. The deal, which is expected to close in the first quarter of PVH’s fiscal 2020 year, is subject to customary closing conditions, including regulatory approval.

“This strategic announcement aligns with PVH’s goal to optimize and streamline its Heritage Brands business in the ever-evolving retail environment and focus on delivering sustainable profitable growth of its global brands Calvin Klein and Tommy Hilfiger,” Emanuel Chirico, chairman and CEO of PVH Corp., said. “I am pleased to see Pentland Group reunite the Speedo business globally, as they are best positioned to capture the full potential of the iconic Speedo brand.”

Pentland Group, which also owns the Berghaus, Canterbury, Ellesse and SeaVees brands, acquired Speedo in 1991 and has since developed it into one of the world’s leading performance swimwear brands.

“We’ve had a great partnership with PVH and they’ve done an incredible job in raising the profile of the Speedo brand and growing the business in North America during their time as licensee,” Andy Long, CEO of Pentland Group’s Pentland Brands division, said.

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The acquisition by Pentland Group comes ahead of the 2020 Tokyo Olympics and Paralympics, which will draw participation by numerous Speedo athletes.

“Now is the right time to bring Speedo North America back into our brand portfolio,” Long said. “Pentland has a strong track record of investing in people and international brands, and we’re looking forward to welcoming the Speedo North America team into the Pentland family and working together on the next chapters in the Speedo success story.”

PVH said it was updating its fourth quarter and full year 2019 earnings outlook in connection the Speedo North America deal. The company projects earnings per share (EPS) for the fourth quarter 2019 will be approximately 20 cent. EPS for the full year 2019 will be approximately $6.32.

The projected fourth quarter and full year 2019 EPS includes an estimated pre-tax non-cash loss of approximately $130 million expected to be recorded related to the sale of the company’s Speedo North America business to Pentland. It also includes the resulting deconsolidation of the Speedo net assets, as well as the estimated tax effect of the loss and the other amounts for the applicable period.