Timberland Explores Plan To Sell Itself Amid Fashion Shift [WSJ]
By DENNIS K. BERMAN and JOSEPH PEREIRA
November 14, 2006; Page A2
Bootmaker Timberland Co., whose products became icons to a generation of hip-hop music fans and dayhikers alike, is exploring a plan to sell itself, people familiar with the matter said.
The firm has in recent weeks begun sounding out potential buyers about a deal and is active with private-equity firms, these people say. The company, which is valued at nearly $2 billion, has hired Goldman Sachs to help run the process, these people said, though any definitive transaction is still quite some time away.
A deal would have to pass muster with the Swartz family that founded the Stratham, N.H.-based, company. It has two classes of shares, and the Swartz family controls all of the Class B shares, which give them about 70% of voting power.
Companies with strong family influence have been at the forefront of a flood of private-equity transactions over the past year. Strong corporate control allows the Swartz clan, for instance, to have the final word on any sale, while remaining impervious to buyers that may want to move on an unsolicited basis. Timberland shares have performed well since the end of 2002, when the stock traded near $15 a share. But through 2006 they have dropped nearly 5%, while the Standard & Poor's 500 Index delivered nearly 11% returns.
Yesterday shares fell 74 cents, or 2.3%, to $31 in 4 p.m. trading on the New York Stock Exchange. Shares have climbed in the past few days after a report in news service MergerMarket named the company as a takeover target. A Timberland spokeswoman didn't return calls for comment.
The company has become best known for its rugged and fashionable waterproof boots and outdoor wear, which became popular as U.S. fashion moved toward more casual clothing. The brand was also avidly adopted by the hip-hop community, and even lauded in a 1993 song by the rap group A Tribe Called Quest.
But fashion has shifted recently toward more formal attire, catching the company somewhat off guard. For the third quarter, net income fell 25% to $51.9 million from $69.2 million. Revenue slid to $503 million from $506 million. The company also said full-year earnings per share would decline 30%, steeper than the 25% drop it had predicted earlier.
Problems facing Timberland include weakness in boots and kids product sales, rising wage pressures and antidumping duties in Europe on products shipped from China and Vietnam. Last month, Prudential analyst Lizabeth Dunn downgraded Timberland shares to "underweight" from "neutral." She said company sales would remain soft through the first half of 2007.
Timberland has deep New England roots. Founder Nathan Swartz began work as an apprentice boot stitcher in Boston. In the 1950s, he bought the Abington Shoe Co. and brought his sons into the company, which took the Timberland name in 1973. His son Sidney Swartz is the company's chairman and his grandson, Jeffrey, is the chief executive and president.
Separately, two private-equity firms agreed to buy apparel retailer Eddie Bauer Holdings Inc. for a total of $286 million. Under terms of the deal, a holding company owned by affiliates of Sun Capital Partners Inc. and Golden Gate Capital will pay $9.25 a share for the Redmond, Wash., chain, a nearly 5% premium over the $8.85 closing price of shares Friday and a 12% premium to the prior four weeks' average closing price. The buyer will assume debt of $328 million. |
