M & A Roundup – Hilfiger, Furr’s Seek Acquisitions

Two companies in widely divergent industries are hitting the acquisition trail and have emphasized the point by retaining investment banks to help them scout deals. Tommy Hilfiger Corp., the famous apparel design and marketing firm, hired Morgan Stanley Dean Witter while Furr’s Restaurant Group Inc. tapped Banc of America Securities. Hilfiger, based in Hong Kong, is using Morgan Stanley to review strategic and financial options including acquisitions, new business opportunities, and stock repurchases. Hilfiger did not return a phone call for comment but analysts familiar with the apparel industry said acquisitions should be good moves for the firm. They noted that the apparel industry not only runs on a seasonal basis but also must continually grapple with rapid changes in fashion tastes and preferences. Exacerbating Hilfiger’s potential vulnerability, they said, is that its target market is in the 16-30 age group which is the most notoriously fickle buying bloc in choosing fashions and often goes for short-lived fads. Acquisitions were seen as a way to offset the risks by taking Hilfiger into new products and different age groups. At Furr’s, headquartered in Richardson, Texas, the story is one of a chronic money-loser that has moved aggressively to right itself and now is in position to accelerate recovery. Banc of America will help identify and evaluate acquisition candidates. Operator of more than 100 cafeterias in 12 southwestern, midwestern, and western states and a food commissary, Furr’s has been in the red for much of the last decade. It did a 1-for-10 reverse stock split last year when the price fell to below $1. Phil Ratner, president and CEO, said that under his stewardship Furr’s has been revitalizing its outlets by remodeling them and revamping menus to emphasize value meals. “We have had double-digit sales growth at the stores we have changed,” he said. Ratner, a seasoned veteran of the restaurant industry, figures he now can turn to acquisitions with Banc of America, which he described as a “restaurant specialist.” He expects the acquisition program to unfold in three stages – first, cafeterias to augment the current core business; second, related concepts, such as buffets; and “in the third circle, the full-service casual dining restaurant.” Furr’s won’t lack for opportunities. The restaurant industry has been a hotbed of acquisitions and restructurings, and many smaller and underperforming operators may be available for sale.