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Original Source: FD (FAIR DISCLOSURE) WIRE
. Anita Britt, Jones Apparel Group, EVP Finance . Peter Boneparth, Jones Apparel Group, President, CEO . Wesley Card, Jones Apparel Group, COO, CFO . Jeff Edelman, UBS Securities, Analyst . Elizabeth Montgomery, S.G. Cowen, Analyst . Robert Ohmes, Banc of America, Analyst . Todd Slater, Lazard Freres, Analyst . Margaret Mager, Goldman Sachs, Analyst . Rob Drbul, Lehman Brothers, Analyst
JNY announced on 01/23/06 that it has agreed to sell the Polo Jeans co. business back to Polo Ralph Lauren Corporation and to settle all outstanding litigation between the companies. JNY expects to receive $355m in cash at closing.
S1. Transaction Review (P.B.) 1. Highlights: 1. JNY announced on 01/23/06 that it has agreed to sell the Polo Jeans co. business back to the Polo Ralph Lauren Corporation and to settle all outstanding litigation between the companies. 2. JNY is expected to receive $355m in cash at closing, some additional amounts depending on working capital adjustments and AR.
1. This is expected to occur in early Feb. 3. The Co. believes that the resolution of both the sale of the business and the litigation has been done in a very cash-efficient manner.
4. The Co. believes that it was in-disputable both by terms of
the license agreement as well as their strategy that in 2010,
they would have exercised their option to buy back the
business at 80% of what then would have been fair market value.
5. The Co. felt it made sense at this point in time to go ahead
and sell the business to Polo and resolve the litigation at
the same time. 6. The Co. believes that this would enable execution of a strategic plan to enhance shareholder value.
1. This would include in general: 1. Increasing investments in capital to expand the product offerings of current brands. 2. Launching and acquiring brands, previously prohibited, due to restrictions under the licensing agreement. 3. Evaluating strategies to re-deploy the capital received on the transaction, including acquisitions and share re-purchase. 7. The Co. also believed that the women's side of the business was quite healthy but it did have substantial challenges in the men's business.
S2. Transaction Details (W.C.) 1. Highlights: 1. 2005 net revenues for Polo Jeans co. was approx. $300m. 2. Operating profit in 2005 on a pre-tax basis was $42m. 3. The Co. expects 2006 that net revenues and profitability from its perspective would have been lower than 2005, just based on the [door] consolidation and retailer consolidations. 4. Additional financial details will be provided in the mid-Feb. call with the shareholders. 5. Moving through 2006 the Co. expects to incur various one time restructuring charges, write-offs, gains, losses, etc …