VANS INC. ANNOUNCES BUYOUT BY N.C. JEANS MAKER.

Byline: Andrew Blazier Staff Writer

SANTA FE SPRINGS - Skate-apparel pioneer Vans Inc. said Tuesday that it will become part of VF Corp., the world's largest jeans manufacturer, in a deal valued at $396 million in cash.

VF, the Greensboro, N.C.-based maker of the Brittania, Lee, Riders, Rustler and Wrangler jeans labels, said it would pay $20.55 per share for Santa Fe Springs-based Vans.

The offer price represented a 30 percent premium on Vans' closing stock price Monday.

``For our shareholders, I think it's great recognition for what we've contributed,'' Vans Chief Executive Officer Gary Schoenfeld said during a conference call with analysts and investors. ``The increase it represents is obviously quite dramatic and quite gratifying.''

Vans employs 1,700 workers, most of them in its Santa Fe Springs facility, while VF employs 52,300 people. Neither company discussed potential fallout for employees from the consolidation.

In announcing the deal, VF executives said they plan to beef up Vans' apparel line, expanding rapidly into both men's and women's markets. Apparel currently makes up just 10 percent of sales at Vans, known primarily for its trendy brand of sneakers and its short-lived venture into skate parks.

With a nearly $400 million price tag, Vans was sold at more than 25 times its expected annual earnings. But VF CEO Mackey McDonald defended the seemingly lofty offer with expectations of a 43 percent gain in Vans' annual revenues, to $500 million per year by 2009.

``It was all about where we thought the company could be in a few years and the implied value based on that,'' McDonald said. ``We see a lot of opportunity here to continue the momentum that's already occurred and keep it going.''

VF CFO Robert Shearer said in-store sales are expected to generate half of the new growth, with the remaining 50 percent coming from expansion of Vans' men's and women's apparel lines.

``It seems like a big number, but maybe they have some high expectations for what they can do within the apparel line,'' said analyst Michael Ryan of Sidoti & Co. LLC.

The greatest change in direction is likely to come in Vans' apparel lines, largely ignored by the current corporate strategy, which has been focused on footwear for alternative sports such as skateboarding and snowboarding and the Vans record label.

``Obviously, VF is in the apparel industry, and I think that's a good opportunity for Vans. I think that's probably where the real benefit is for them,'' Ryan said. ``I think they got a pretty good offer there, and I think shareholders are pleased with that.''

The deal culminates a one-year turnaround that saw Vans discontinue all but a handful of its failed skate parks - a concept it created - as it tried to stop gushing losses. Vans expects to report a net profit of $14.7 million when its fiscal year ends in May, a far cry from the $30 million it lost in 2003.

Meanwhile, Vans' stock climbed steadily, from $4.68 per share a year ago to $15.81 per share before Tuesday's announcement - a 238 percent increase.

Vans shares soared 28 percent early Tuesday and held steady the remainder of the day, as investors quickly snatched up shares in anticipation of a major windfall. Shares of Vans closed up $4.46 per share, to $20.29, on the Nasdaq Stock Market.

Shares of VF finished up 23 cents Tuesday, to $47.55, on the New York Stock Exchange.

In VF, Vans joins a $5.2 billion-a-year jeans juggernaut that already includes Chic, Gitano, H.I.S. and Earl Jeans brands. It also produces Vanity Fair, Lily of France and Vassarette lingerie, Jansport and Eastpak backpacks and The North Face outdoor apparel.

It is the second purchase in eight months for VF. In August, it acquired upscale apparel maker Nautica Enterprises Inc. for $600 million.

Andrew Blazier, [phone]

andrew.blazier(at)sgvn.com

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Photo:

(color) Chris Overholser of Vans Inc. leads a tour of the Santa Fe Springs- based firm's warehouse in this 2002 photo. The skating apparel maker will be purchased by VF Corp. of North Carolina.

Keith Durflinger/Staff Photographer