bloggingbuyouts

Apax Partners, which took clothier Tommy Hilfiger private in 2006 and had planned to take the company public again soon, has shelved (subscription) those IPO plans in light of the weakened capital markets.

The company said that, "Considering recent volatile market conditions, management and shareholders decided to postpone an IPO process until such time that market conditions have stabilized".

Regardless of when the IPO takes place, the $1.6 billion buyout of the company is a shining example of the value-adding changes that buyout shops can make. After Apax took it private, the company moved its headquarters to Amsterdam, and let its U.S. sales plummet by 50% in one-year, focusing instead on the European market where the label is trendier and able to sell at higher price-points.

As recently as October, it was expected that Apax would be able to book a $1.7 billion profit on the company. As strong as the performance has been of late, I can't help wondering whether Hilfiger would do best remaining private. Even with improved financial statements, Hilfiger is best-known as a brand that was iconic during the 1990's, and Apax might have a hard time getting investors to pay up for that.

Less than three years after taking Tommy Hilfiger private, Apax Partners is looking to cash out -- and book a cool $1.7 billion in profit. The company is reportedly exploring an IPO for the fashion label.

When I first saw that Hilfiger had appreciated so much in the past couple years, I was surprised. Tommy isn't part of the U.S. fashion industry in any meaningful way anymore, but according to (subscription) The Wall Street Journal, that is by design. The company moved its headquarters to Amsterdam, and let its U.S. sales plummet by 50% in one-year, focusing instead on the European market, where the label is trendier and able to sell at higher price-points.

As The Journal says, "So it may makes sense for Apax to reap some of its gains; the fashion business is fickle, as Hilfiger's boom-to-bust cycle in the 1990s shows. But new outlets and a greater focus on wider European profit margins should keep driving profit growth. This turnaround could yet turn into a growth story."

But you have to wonder. Is letting the U.S. market go in favor of greater international expansion something that would have been impossible to do as a public company? Did Hilfiger's board of directors leave a ton of money on the table by letting the company be taken private, rather than making these changes as a public company?