After topping all-time highs on Friday, shares of The North
Face, Wrangler, and Lee owner VF Corporation (VFC 91.71, -4.58, -4.76%)
announced its Board of Directors' intention to separate the company into two
independent, publicly traded companies: VF Corporation, which will continue the company’s global
apparel and footwear businesses, and a yet-to-be named company (for now
referred to as NewCo) that will spin-off VF’s Jeans and VF Outlet businesses.
This morning’s news confirms Friday’s press reports suggesting that VFC was considering a spin-off or sale of its Wrangler and Lee brands.
With estimated annual revenue of more than $11 bln, the new VF will have a mid-teen total shareholder return target, including a strong dividend yield in line with the S&P 500. Consistent with its enhanced focus on consumers interested in outdoor and active-wear, 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 as well as both VF’s Global Innovation Center for technical fabrics and its Digital Lab.
NewCo, meanwhile, will house VFC’s denim brands, including Wrangler and Lee, and will also integrate the VF Outlet business. With estimated annual revenue of more than $2.5 bln and a high single-digit total shareholder return target, NewCo is expected to have an attractive financial profile, including a sustainable high dividend yield. 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.
Additionally, NewCo will have diversified geographic exposure and plans to further extend its geographic footprint with a focus on Asia, led by building its brands’ established presence in China. NewCo also will pursue opportunities to expand its distribution to new customers and categories, with a focus on both their owned and wholesale digital partner channels.
The company also announced the anticipated designations of Scott Baxter as CEO of NewCo and Rustin Welton as CFO, effective upon completion of the transaction. The company expects to create these companies through a tax-free spin-off of NewCo to VF’s shareholders.
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.
- OUR VIEW
- LEARNING CENTER