2nd UPDATE: VF To Buy Timberland For $2 Billion Cash, A 43% Premium

VF Corp. (VFC), whose brands include Wrangler denim and Nautica apparel, agreed to buy footwear company Timberland Co. (TBL) for about $2 billion, taking advantage of Timberland's beaten-down stock price to boost its outdoor and action-sports businesses.

VF's offer of $43 a share represents a premium of 43% to Friday's close. Shares of Timberland, which specializes in boots and outdoor apparel, traded above the offer price as recently as late April, but a disappointing first-quarter report last month sent the stock tumbling.

Investors welcomed the deal, pushing Timberland shares up to $42.76, just below the asking price, in recent trading. VF shares gained 10.4% to $101.35.

Other footwear companies, including Crocs Inc. (CROX) and Deckers Outdoor Corp. (DECK), edged up on hopes they might be also acquisition candidates. Crocs increased 2.1% to $22.09, while Deckers rose 1.2% to $78.62. Meanwhile, footwear retailer Finish Line Inc. (FINL) gained 3% to $21.71 and Columbia Sportswear Co. (COLM), whose products compete with VF-owned North Face as well as Timberland, rose 2.9% to $60.14.

VF and Timberland said they expect to close the deal late in the third quarter. The merger agreement allows for Timberland to accept a superior proposal before July 26, though shareholders affiliated with the founding Swartz family already have agreed to approve the VF bid.

Timberland is expected to add about $700 million to VF's 2011 revenue and boost per-share earnings by 45 cents in the second half of 2011 and by 90 cents in 2012, excluding acquisition-related expenses.

VF Chairman and Chief Executive Eric Wiseman called the acquisition "transformative." VF's outdoor and action-sports businesses will now comprise 50% of total revenue, and are expected to hit 60% by fiscal 2015, Wiseman said during a conference call to discuss the deal.

The Greensboro, N.C., company's other brands are wide-ranging, including 7 For All Mankind premium denim, John Varvatos men's clothing and Reef surf gear. Its outdoor and active brands include Vans, Lee and North Face, and the company said Timberland will be complementary to, rather than competitive with, those names.

VF will fund the deal with $500 million in cash on hand, $700 million in commercial paper and $800 million in term debt.

In addition to expanding VF's active-gear and footwear lines, the deal also will boost the company's overseas presence. International sales now comprise 30% of VF's sales, while more than half of Timberland's sales come from outside North America. The combined company will derive 35% of revenue from international markets.

Timberland will remain headquartered in Stratham, N.H.

In late April, VF Corp. posted a 23% rise in first-quarter earnings. Sales grew across the board, but were particularly strong in its outdoor and action-sports products division. Revenue jumped 12% to $1.96 billion.

Meanwhile, Timberland's first-quarter earnings fell 30% as the company spent more on retail and advertising and saw higher product costs. Revenue rose 10% to $349 million, a growth rate that VF intends to maintain as it further expands womenswear offerings and the Smartwool brand.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

--Melodie Warner contributed to this article.

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