California Apparel News

The number seven now adds up to $775 million.

The Greensboro, N.C.–based apparel giant VF Corp., the world’s No. 1 jeans maker, announced a definitive agreement to purchase Los Angeles–based premium-denim veteran 7 For All Mankind for $775 million in cash.

In addition, VF announced it will buy Portland, Ore.–based Lucy Activewear, a retailer and brand whose revenues are expected to reach $57 million this year, for $110 million. The two companies are to be the start of a new division for VF, VF Contemporary Brands, which will focus on lifestyle-based brands.

Michael Egeck, who joined 7 For All Mankind last August as chief executive, will be made president of the newly formed Contemporary Brands division. Additionally, Egeck, who held a post as VF’s president of Outdoor in North America division prior to joining the denim maker, will retain his post at 7 For All Mankind and lead the new division from Los Angeles. Peter Koral, the company’s founder, will finish up his employment contract, which ends at the beginning of March, becoming chairman emeritus and an advisor to the corporation.

Eric Wiseman, VF’s president and chief operating officer, has set a goal that 7 For All Mankind will grow 15 percent a year over the next five years. The premium-denim brand estimates its current annual revenues hover around $300 million. “The brand also generates strong profitability, with operating margins over 20 percent,” Wiseman said in a statement.

Executives at 7 For All Mankind were ecstatic about the deal even though they had been up until the early morning hours of Thursday negotiating the last details of the sale.

“The first thing I’m going to do is get some sleep,” said a weary Koral from his office. “Then I’m going to take my family out and have a nice dinner and thank the Lord a few times.”

Koral’s other business, L’Koral Industries, which makes apparel for the juniors and missy market, will continue to operate as usual, Koral said. He is planning to sell his controlling interest to his long-time business partner, Jane Siskin, who has basically taken the helm of the Los Angeles apparel maker. L’Koral Industries is expected to have $175 million in revenues this year, Koral said.

Egeck will be working in familiar territory now that he will be back with the VF family. “I feel very good about the sale. We are in a place in our business where we have a very clear growth initiative, and those initiatives are with a strong, strategic partner.”

The VF deal came to light at 7 For All Mankind’s board meeting in May. At that time, the directors decided to consider a number of offers that had been made by various companies.

“At the time, our board decided it was in their best interest to pursue this interest and evaluate the brands that would be a best-fit partner,” Egeck said. “As part of the process, VF bubbled up as a preferred partner.”

VF, which operates Jeanswear, Outdoor and Sportswear divisions, owns more than 35 other brands, including Nautica, John Varvatos, Reef, Vans, The North Face, Lee, Wrangler and East Pak. The new Contemporary division is the latest in VF’s move toward expansion. Koral will be advising VF as they search for more contemporary brands to purchase in Southern California and other parts of the country, Egeck said.

Koral has a long history in the garment industry as a third-generation apparel maker. He started 7 For All Mankind in 2000 after jeans designer Jerome Dahan and marketing executive Michael Glasser approached him with an idea for top-notch premium jeans that combined high-end fabric, a unique pocket design and a cut that would warrant a $150 price tag.

Dahan and Glasser left the company a few years later after a drawn-out court battle between the partners, resulting in Koral paying Dahan and Glasser more than $50 million for their share of the company.

In 2005, Koral sold a 50 percent stake of his business to Bear, Stearns Merchant Banking, The Bear Stearns Companies’ private equity branch, to raise funds to grow the brand globally.

The investment was a success story for Bear Stearns. “We continually look to invest in strong brands, and in this instance, we identified a very successful entrepreneur whose business could flourish with the resources and expertise we could bring to the table,” said John Howard, Bear, Stearns Merchant Banking’s chief executive, in a statement. “VF Corp. is an excellent strategic partner for 7 to continue its growth and capitalize on its extraordinary brand.”

VF’s other acquisition, Lucy, launched in 1999 as an e-commerce site only, but after less than two years, the company shifted focus, shuttering its Web site to focus on opening bricks-and-mortar stores. Lucy recently opened its 50th store. The company currently operates stores in 13 states and in Washington, D.C. The e-commerce site (www.lucy.com) relaunched in 2004.

VF’s stock dropped more than 2 percent on the news of the two acquisitions to $86.63 per share on July 26.