Polo Consolidating Japan Holdings

by MR Magazine Staff Apr 13, 2007

Polo Ralph Lauren said early Friday that it’s going to buy the 80% of Japanese sub-licensee Impact 21 it doesn’t currently own and the 50% stake it doesn’t currently hold in its Japanese master licensee, Polo Ralph Lauren Japan.

Polo estimated that the two purchases will cost a total of about $370 million and that it will require $150 million in funding to execute them.

Polo will commence a tender offer at about $22 (or 2600 yen) a share to acquire the 80% stake it doesn’t currently own in Impact 21, its sub-licensee for men’s and women’s apparel, jeanswear and accessories in Japan. The purchase price represents a 19% premium to Impact’s closing stock price of 2190 yen as of April 12.

Polo said the Impact tender offer has the support of the Impact’s board and Onward Kashiyama, Imact’s largest shareholder with a 41% stake. (The 39% stake not owned by Polo or Kashiyama is publicly traded.) The tender offer will commence April 17 and conclude May 21. The offer is contingent upon Polo achieving a minimum ownership position of 66.67% of shares.

The acquisition of the remaining half of master licensee Polo Ralph Lauren Japan would be made for about $23 million and would be consummated upon the successful completion of the Impact tender offer. PRLJ then would become a wholly owned subsidiary of Polo.

“We are extremely grateful to both Onward Kashiyama and Impact 21 for their collaboration in helping to establish Polo Ralph Lauren as a significant brand in the important Japanese market,” said Ralph Lauren, chairman and chief executive officer of Polo Ralph Lauren. “For nearly 30 years, the Japanese customer has responded well to our extensive range of products. With that foundation, and with the opening of our Tokyo flagship store last year, we have been able to expand the assortment of our luxury products and show the Japanese customer the diversity, breadth and excitement of the brand.”

Roger Farah, president and chief operating officer of Polo, noted that Japan was second in Polo sales only to the US market. Following the transactions, he said, Polo intends to “enhance our presence in major department stores, expand our portfolio of Ralph Lauren stores and further build the infrastructure to support a growing business. We will look to reinforce the brand’s image and elevate the distribution in Japan to better align with our business globally.”

Polo Ralph Lauren entered Japan in 1978 through a master license with Seibu Department Stores. The company acquired a 50% stake in PRLJ and a 20% interest in Impact 21 in 2003. Impact’s annual sales are about $263 million.