- Company Plans Tax-Free Spin-off of
Jeans Business to VF Shareholders
- Separation to Create Enhanced Prospects
for Long-Term Value Creation
- Transaction Expected to be Completed in
the First Half of Calendar 2019
VF Corporation (NYSE: VFC), a global leader in branded lifestyle
apparel, footwear and accessories, today announced that its Board
of Directors intends to separate the company into two independent,
publicly traded companies: VF Corporation, a global apparel and
footwear powerhouse, and a yet-to-be named company (NewCo), which
will hold VF’s Jeans and VF Outlet businesses and will be a global
leader in the denim category. The company expects to create these
companies through a tax-free spin-off of NewCo to VF’s
shareholders.
“As shown by our recent quarterly results, VF continues to gain
momentum on our transformation journey, marked by strong progress
on our strategic initiatives and portfolio management,” said Steve
Rendle, Chairman, President and Chief Executive Officer. “With
these strong foundations in place, we are now ideally positioned to
create two independent, leading, global companies. In alignment
with our strategic plan, the decision to separate these businesses
will allow VF to sharpen its focus as a consumer-centric and
retail-minded organization anchored in activity-based lifestyle
brands. Our Jeans platform is a successful, sustainable business
with iconic global brands and a clear path to value creation as a
standalone entity. This exciting step forward will mean that both
VF and NewCo have the resources, management focus and financial
flexibility to thrive in a dynamic consumer marketplace, creating
an even brighter future for both organizations and all of their
stakeholders.”
Compelling Strategic Rationale
During the past several years, VF has undertaken a series of
transformational portfolio actions that have driven superior value
creation, including an annualized total shareholder return of more
than 17 percent since 2000 – ranking the company in the top 10
percent of S&P 500 Index performers during that period.
In 2017, VF unveiled its five-year growth priorities. These
included a disciplined reshaping of the brand portfolio to better
position the company for long-term success in a quickly changing
business landscape. Since then, VF has pursued a range of
opportunities pivotal to its portfolio transformation, including
the acquisitions of Williamson-Dickie, and the Icebreaker® and
Altra® brands, and the divestitures of the Nautica® brand and the
Licensed Sports Group, including the Majestic® brand. Through these
actions, the company has sharpened its focus on activity-based
outdoor, active and work lifestyles.
As VF continues implementing its 2021 strategic growth plan, its
Board of Directors has consistently explored opportunities to
enhance long-term shareholder value, and believes that separating
these businesses into two, independent, publicly traded companies
is the best path forward. The strategic priorities and financial
characteristics of VF and NewCo have evolved over time and the
synergies across these businesses have become less clear. Enabling
the Jeans business to operate independently from VF will allow it
to focus on its long-term strategic priorities and achieve even
greater potential as a separate company with a separate management
team.
The company believes the separation will offer several
benefits:
- Both companies will benefit from
enhanced strategic and management focus;
- Each company will benefit from reduced
managerial and operational complexity;
- Both companies will be able to optimize
their distinct capabilities and focus investment on independent
growth priorities, positioning each for stronger, more sustainable
value creation;
- Each company will have a flexible
capital structure with the ability to fund targeted profitable
growth; and,
- The operational and financial profile
of each company will more closely align with its natural investor
type.
A More Focused VF
The separation will sharpen VF’s focus as a global apparel and
footwear powerhouse with a portfolio of iconic brands in highly
attractive and growing consumer segments and categories, leading to
enhanced long-term revenue growth and margin expansion. With
estimated annual revenue of more than $11 billion, the new VF will
have a mid-teen total shareholder return target, including a strong
dividend yield in line with the S&P 500. Building on VF’s
successful track record of acquiring and accelerating brand growth,
the separation will give the company more flexibility to pursue its
M&A strategy, explore new growth vectors and apply even more
investment behind its organic brand portfolio.
Consistent with its enhanced focus on the outdoor and active
consumer, VF will move its global headquarters to the metro Denver
area, which will also serve as the home for The North Face®,
JanSport®, Smartwool®, Altra® and Eagle Creek® brands and both VF’s
Global Innovation Center for technical fabrics and Digital Lab. The
new Colorado location will be staffed by brand leaders and
associates, innovation staff, certain members of VF’s global
leadership team and other corporate functions.
“Locating these brands, along with select VF leaders, at the
base of the Rocky Mountains will enable us to accelerate
innovation, unlock collaboration across brands and functions,
attract and retain talent and connect with consumers,” said Rendle,
who will continue to lead VF.
A Global Leader in Denim
NewCo will be a global leader in the denim category, with iconic
brands steeped in rich heritage and authenticity, including the
Wrangler® and Lee® brands. The VF Outlet business will be part of
NewCo’s portfolio.
With estimated annual revenue of more than $2.5 billion and a
high single-digit total shareholder return target, NewCo will have
an attractive financial profile, including a sustainable high
dividend yield. NewCo will have a best-in-class supply chain,
channel and category management expertise, reinforced by deep and
long-standing relationships with leading global retailers.
Additionally, NewCo will have diversified geographic exposure and
plans to further extend its geographic footprint with a sharp focus
on Asia, building on its established presence in China. NewCo also
will have the opportunity to expand its distribution to new
customers and categories, with a focus on both their owned and
wholesale digital partner channels. NewCo expects to unlock
significant scale and cost efficiencies by streamlining operations,
providing flexibility to pursue strategic acquisitions over
time.
The company also today announced the anticipated designation of
Scott Baxter as Chief Executive Officer of NewCo and Rustin Welton
as Chief Financial Officer, effective upon completion of the
transaction.
“Scott is an extremely talented leader who has a long track
record of success, which includes leading the Jeans business from
2011 through 2015, a period during which the business grew at a
mid-single-digit rate,” said Rendle. “There’s no one more qualified
and appropriate to serve as CEO than Scott. I am confident he will
do an exceptional job as CEO of NewCo.”
The company plans to announce additional members of the NewCo
executive team and further details on the composition of the Board
of Directors ahead of the completion of the transaction.
NewCo’s global headquarters will be in Greensboro, N.C. The Lee®
brand will move its headquarters to Greensboro from Kansas City,
joining the Wrangler® brand.
Rendle added, “We’re proud of our Greensboro, N.C., roots and
remain committed to the community, including a strong ongoing
employment presence. Combined with the relocation of the Lee® brand
from Kansas City and the establishment of a major new public
company with Greensboro headquarters, we expect that total VF and
NewCo employment in the area will remain at current levels.”
“This is great news for our associates, who will become part of
two more sharply-focused, dynamic companies, with the ability to
build even stronger partnerships with customers and deliver
fantastic innovation for consumers,” he said. “I want to thank all
of our outstanding colleagues for the extraordinary work they have
done to get us to this point. Their talent, passion and hard work
will allow both VF and NewCo to succeed long into the future.”
Next Steps
The separation is currently targeted to be completed in the
first half of calendar 2019, subject to final approval by the
company’s Board of Directors, customary regulatory approvals and
tax and legal considerations. Throughout the separation process, VF
management will remain committed to business as usual with all key
stakeholders, including customers, employees and local
communities.
Investor days will be held for both VF and NewCo during the
first half of calendar 2019.
Barclays is acting as financial advisor to VF Corporation and
Davis Polk and Wardwell LLP is acting as legal advisor.
Webcast, Conference Call and Presentation Materials
VF will host a conference call to discuss the transaction at
8:00 a.m. Eastern Time today. Webcast registration and presentation
materials are accessible at ir.vfc.com. For those unable to listen
to the live broadcast, an archived version will be available at the
same location. Those interested to participate in the call may dial
(877) 407-8129 (domestic) or (201) 493-6710 (international).
Additional information regarding the proposed separation is
available at TwoGlobalLeaders.com.
About VF
VF Corporation (NYSE: VFC) outfits consumers around the world
with its diverse portfolio of iconic lifestyle brands, including
Vans®, The North Face®, Timberland®, Wrangler® and Lee®.
Founded in 1899, VF is one of the world’s largest apparel, footwear
and accessories companies with socially and environmentally
responsible operations spanning numerous geographies, product
categories and distribution channels. VF is committed to delivering
innovative products to consumers and creating long-term value for
its customers and shareholders. For more information,
visit www.vfc.com.
Forward-Looking Statements
Certain statements included in this release and attachments are
“forward-looking statements” within the meaning of the federal
securities laws. Forward-looking statements are made based on our
expectations and beliefs concerning future events impacting VF and
therefore involve several risks and uncertainties. You can identify
these statements by the fact that they use words such as “will,”
“anticipate,” “estimate,” “expect,” “should,” “may,” “believe,”
“intend,” and “plan,” and other words and terms of similar meaning
or use of future dates. We caution that forward-looking statements
are not guarantees and that actual results could differ materially
from those expressed or implied in the forward-looking statements.
Potential risks and uncertainties that could cause the actual
results of operations or financial condition of VF to differ
materially from those expressed or implied by forward-looking
statements in this release include, but are not limited to: foreign
currency fluctuations; the level of consumer demand for apparel,
footwear and accessories; disruption to VF’s distribution system;
VF’s reliance on a small number of large customers; the financial
strength of VF’s customers; fluctuations in the price, availability
and quality of raw materials and contracted products; disruption
and volatility in the global capital and credit markets; VF’s
response to changing fashion trends, evolving consumer preferences
and changing patterns of consumer behavior, intense competition
from online retailers, manufacturing and product innovation;
increasing pressure on margins; VF’s ability to implement its
business strategy; VF’s ability to grow its international and
direct-to-consumer businesses; VF’s and its customers’ and vendors’
ability to maintain the strength and security of information
technology systems; stability of VF’s manufacturing facilities and
foreign suppliers; continued use by VF’s suppliers of ethical
business practices; VF’s ability to accurately forecast demand for
products; continuity of members of VF’s management; VF’s ability to
protect trademarks and other intellectual property rights; possible
goodwill and other asset impairment; maintenance by VF’s licensees
and distributors of the value of VF’s brands; VF’s ability to
execute and integrate acquisitions; changes in tax laws and
liabilities; legal, regulatory, political and economic risks; and
adverse or unexpected weather conditions; and risks associated with
the proposed spin-off of our Jeans business and our ability to
realize the expected benefit of the spin-off. More information on
potential factors that could affect VF’s financial results is
included from time to time in VF’s public reports filed with the
Securities and Exchange Commission, including VF’s Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q. Our forward-looking
statements in this release and attachments speak only as of the
date of this release and attachments. Factors or events that could
cause our actual results to differ may emerge from time to time,
and it is not possible for us to predict all of them. Unless
required by law, we undertake no obligation to update publicly any
forward-looking statements as a result of new information, future
events or otherwise. Additional information about the company is
contained in the company’s filings with the SEC and is available on
VF’s website, www.vfc.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20180813005115/en/
VF CorporationInvestors:Joe Alkire,
336-424-7711Vice President, Corporate Development, Investor
Relations and Financial Planning &
Analysisjoe_alkire@vfc.comorMedia:Craig Hodges,
336-424-5636Senior Director, Corporate
CommunicationsCraig_hodges@vfc.com
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