Warnaco Finalizes Op Acquisition
The Warnaco Group Inc. is entering the action-sportswear market.
The New York–based apparel powerhouse has acquired the Ocean Pacific Apparel Corp. for $40 million, according to The Sage Group LLC, the Los Angeles–based investment company that brokered the transaction on behalf of the surfwear label.
The acquisition includes $40 million in cash, plus the assumption of $1 million in debt, according to Paul Altman, vice president of The Sage Group. Additionally, performance- based earn-out payments are included in the sale, as long as certain incremental business targets are achieved, Altman said. “We expect the total purchase price [to be] $50 million and above,” he added.
Op Chief Executive Officer Dick Baker said the synergy between the companies makes for a good fit.
“Op’s young active customer fits into Warnaco’s market-share focus, which is swimwear, intimate apparel and sportswear,” Baker said. “Op is a lifestyle brand that has room to expand in each of those categories.”
Baker said Op’s headquarters will remain in Irvine, and none of its 23 employees will be laid off.
Founded in 1972 by surfer Jim Jenks, Op saw sales reach the $350 million range before the company filed for bankruptcy in 1992. Six years later, San Francisco–based investment group Doyle & Boissiere LLC, led by apparel veteran Dick Baker, resuscitated the ailing surfwear maker. Op earned sales of $230 million last year.
Op has 35 licensees in 83 countries for apparel, swimwear, accessories and home furnishings, among other product categories. Op apparel brands include Op, a better activewear line sold in specialty and department stores; Ocean Pacific, a sophisticated resort and casualwear collection sold in department stores; and Seven2, an edgy activewear and accessories collection with urban influences.
Warnaco is a $1.4 billion apparel giant and the owner of a high-profile market brand portfolio that includes Calvin Klein, Speedo and Chaps by Ralph Lauren. Like Op, Warnaco fell on hard times in 2001 before reemerging from $3 billion of debt in February 2003.
Baker said Op intends to fulfill its contracts with its current licensees. Among them are Irvine, Calif.–based Ray’s Apparel Inc.— maker of young men’s, boys’, juniors and girls’ apparel—and Los Angeles–based swimwear maker Apparel Ventures Inc.
Warnaco will begin producing apparel and accessories that are not currently under license, Baker said, adding that the initial stages of Op’s brand extension will include the first women’s sportswear collection under the Ocean Pacific label and intimate apparel under the Op brand name. Those lines will begin production as early as 2005, he said.
The courtship between Warnaco and Op began last April, after Warnaco Chief Executive Officer Joe Gromek visited the surfwear maker’s headquarters in Irvine. Shortly after, he presented Op with a proposal expressing interest in the company’s brands.
The Sage Group is a mergers and acquisitions company that specializes in brand and consumer products and other middle-market companies. The investment-banking company represented a number of West Coast apparel makers in their sales to large apparel conglomerates in recent years, including Earl Jean in its sale to Nautica Enterprises Inc. and Juicy Couture in its sale to Liz Claiborne Inc.
“Then Op became more involved to help them improve the deal,” Altman said, adding that other parties interested in Op included financial and strategic buyers as well as large companies with resources similar to Warnaco’s.
“Op and Dick Baker really liked the infrastructure and strategic vision of the Warnaco team to take the Op brand to the next level,” Altman noted. —Claudia Figueroa
