Polo Ralph Lauren (RL.N), one
of the world's best known fashion designers, said Monday it
would buy Canadian apparel retailer Club Monaco Inc. (CMI.TO)
for $52.5 million, more than doubling its retail base and
expanding into a lower income bracket.
Under the deal, Polo Ralph Lauren, whose designer goods
range from shirts to cologne to bath towels, agreed to pay C$13
($19.75) a share to purchase all 6.5 million outstanding common
shares of Club Monaco, which sells casual apparel in Canada, the
United States and Asia, and assume its debt.
"This acquisition is a major growth opportunity for us to
build a significant vertically integrated retailing format that
complements our other retailing formats," said Ralph Lauren,
chairman and chief executive officer of Polo Ralph Lauren.
Club Monaco, which operates or franchises about 125 outlets
in Canada, the U.S., Japan, Korea and other Asian countries,
will operate as a separate subsidiary of Polo Ralph Lauren.
"It gives Polo Ralph Lauren a taste of transnational
retailing," said Kurt Barnard, publisher of Barnard's Retail
Trend Report in Upper Montclair, New Jersey. "It's their way to
try to take advantage of a market I think is good for them."
He added that the Canadian retail market is not quite as
upscale as the sector in which Polo Ralph Lauren operates in the
United States.
Club Monaco's clothes are "younger, hip, edgy," said
analyst Carol Pope Murray of J.P. Morgan Securities.
"It's a product design and brand design that captures a
different consumer than Polo," she said.
She said Club Monaco will benefit from Polo's size and
experience.
For Club Monaco, the deal, which is expected to close by
this spring, gives it access to cash and a name that should help
it grow.
"Today's announcement offers Club Monaco the opportunity to
achieve stronger growth as part of one of the world's most
highly respected companies," said Club Monaco's chairman,
president and chief executive Joseph Mimran, who owns 20 percent
of the company's stock, in a statement.
In the same statement, Lauren said his company should be
able to accelerate the growth of Club Monaco, which said in
mid-February that it was in talks with a third party regarding a
possible business combination.
Polo Ralph Lauren operates about 30 Polo Ralph Lauren, Polo
Jeans and Polo Sport stores and more than 70 outlet stores in
the U.S. The stock was off 56 cents at $19.375 in morning
activity on the New York Stock Exchange.
Club Monaco, traded on the Toronto Stock Exchange, was up
C$1.60 ($2.43) at $12.60 ($19.15).
