VF Corporation has announced that its Board of Directors intends to separate the company into two independent, publicly traded companies: VF Corporation, a global apparel and footwear powerhouse, and a yet-to-be named company (NewCo), which will hold VF’s Jeans and VF Outlet businesses and will be a global leader in the denim category. The company expects to create these companies through a tax-free spin-off of NewCo to VF’s shareholders.
“As shown by our recent quarterly results, VF continues to gain momentum on our transformation journey, marked by strong progress on our strategic initiatives and portfolio management,” said Steve Rendle, Chairman, President and Chief Executive Officer. “With these strong foundations in place, we are now ideally positioned to create two independent, leading, global companies. In alignment with our strategic plan, the decision to separate these businesses will allow VF to sharpen its focus as a consumer-centric and retail-minded organization anchored in activity-based lifestyle brands. Our Jeans platform is a successful, sustainable business with iconic global brands and a clear path to value creation as a standalone entity. This exciting step forward will mean that both VF and NewCo have the resources, management focus and financial flexibility to thrive in a dynamic consumer marketplace, creating an even brighter future for both organizations and all of their stakeholders.”
Compelling Strategic Rationale
In 2017, VF unveiled its five-year growth priorities. These included a disciplined reshaping of the brand portfolio to better position the company for long-term success in a quickly changing business landscape.
As VF continues implementing its 2021 strategic growth plan, its Board of Directors has consistently explored opportunities to enhance long-term shareholder value, and believes that separating these businesses into two, independent, publicly traded companies is the best path forward.
As the company announced the strategic priorities and financial characteristics of VF and NewCo have evolved over time and the synergies across these businesses have become less clear. Enabling the Jeans business to operate independently from VF will allow it to focus on its long-term strategic priorities and achieve even greater potential as a separate company with a separate management team.
The footwear section
With the separation VF’s focus as a global apparel and footwear section should be sharpened.
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 and both VF’s Global Innovation Center for technical fabrics and Digital Lab. The new Colorado location will be staffed by brand leaders and associates, innovation staff, certain members of VF’s global leadership team and other corporate functions.
“Locating these brands, along with select VF leaders, at the base of the Rocky Mountains will enable us to accelerate innovation, unlock collaboration across brands and functions, attract and retain talent and connect with consumers,” said Rendle, who will continue to lead VF.
The denim section
NewCo should include the Wrangler® and Lee® brands as well as the VF Outlet business.
The company also announced the anticipated designation of Scott Baxter as Chief Executive Officer of NewCo and Rustin Welton as Chief Financial Officer, effective upon completion of the transaction.
“Scott is an extremely talented leader who has a long track record of success, which includes leading the Jeans business from 2011 through 2015, a period during which the business grew at a mid-single-digit rate,” said Rendle. “There’s no one more qualified and appropriate to serve as CEO than Scott. I am confident he will do an exceptional job as CEO of NewCo.”
The company will announce additional members of the NewCo executive team and further details on the composition of the Board of Directors ahead of the completion of the transaction later.
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.
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. Throughout the separation process, VF management will remain committed to business as usual with all key stakeholders, including customers, employees and local communities.
Investor days will be held for both VF and NewCo during the first half of calendar 2019.
Barclays is acting as financial advisor to VF Corporation and Davis Polk and Wardwell LLP is acting as legal advisor.