Why VF Is Buying Supreme For $2.1 Billion

By Amit Chowdhry ● November 10, 2020
  • VF Corp (NYSE: VFC) — a global leader in branded lifestyle apparel, footwear, and accessories — announced recently that it is buying Supreme for $2.1 billion. This is why.

VF Corp (NYSE: VFC) — a global leader in branded lifestyle apparel, footwear, and accessories — announced recently that it is buying Supreme. Supreme is a privately-owned global streetwear brand. And current investors The Carlyle Group and Goode Partners are selling their stakes in the Supreme brand. The deal is expected to be completed late in the calendar year 2020, subject to customary closing conditions and regulatory approval.

Supreme is known for selling apparel, accessories, and footwear under its namesake brand globally through direct-to-consumer channels, primarily digital. And the Supreme brand’s founder James Jebbia and the senior leadership team of the brand will remain with the company, based in New York City, New York.

VF Corporation’s origins date back to 1899 and it is known for a family of iconic outdoor, active, and workwear brands, including Vans, The North Face, Timberland, and Dickies. And Supreme had opened its doors on Lafayette Street in downtown Manhattan in April 1994. And since then, Supreme became a brand preference for skaters and local artists.

After the merger deal was announced, the stock price if VF substantially jumped. The stock price went from $70.01 on Friday, November 6 at 4 PM to $80.98 as of November 9 at 10 AM, a 15.68% jump in price. And this deal is the largest VF made since it bought Timberland in 2011 for $2.3 billion.

VF said on Monday that Supreme will be modestly accretive to its revenue and adjusted earnings per share for the year ending March 2021. And in the following fiscal year, Supreme is expected to contribute at least $500 million of revenue and 20 cents in adjusted EPS.

VF noted it is going to learn more from Supreme’s business model — which taps into weekly drops of new products and collaborations. Supreme has partnered with brands such as Champion, Levi Strauss, and VF’s own brands. For example, Supreme first partnered with Vans in 1996.

Supreme’s product drops tend to sell out rapidly. And due to the short supply, the resale market for Supreme products tend to do very well also. Currently, Supreme has 12 retail stores and digital accounts for about 60% of sales. And VF believes that Supreme can hit $1 billion in sales over time.

Morgan Stanley had provided a fairness opinion in connection with the transaction. And Davis Polk & Wardwell LLP served as legal advisor.

KEY QUOTES:

“We are thrilled to welcome Supreme to the VF family and to build on our decades-long relationship as we create value for all of our stakeholders. VF is the ideal steward to honor the authentic heritage of this cultural lifestyle brand while providing the opportunity to leverage our scale and expertise to enable sustainable long-term growth. The acquisition of the Supreme brand is further validation of our vision and strategy to further evolve our portfolio of brands to align with the total addressable market opportunities we see driving the apparel and footwear sector. The Supreme brand will further accelerate VF’s hyper-digital business model transformation and will be a meaningful driver of VF’s commitment to top quartile total shareholder return and long-term value creation.”

— Steve Rendle, VF’s Chairman, President, and Chief Executive Officer

“We are proud to join VF, a world-class company that is home to great brands we’ve worked with for years, including The North Face, Vans, and Timberland. This partnership will maintain our unique culture and independence, while allowing us to grow on the same path we’ve been on since 1994.”

— Supreme’s founder James Jebbia