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V.F. agrees to buy workwear maker Williamson-Dickie for $820 million

Apparel retail group V.F. Corp. said Aug. 14 it has agreed to buy workwear maker Williamson-Dickie Manufacturing Co. for $820 million, adding brands including Dickies, Workrite, Kodiak, Terra and Walls to its portfolio. In addition, the company raised its earnings outlook for 2017.

The all-cash transaction is expected to be finalized in the fourth quarter, V.F. Corp. said. Williamson-Dickie is privately held.

"When we introduced our 2021 global business strategy earlier this year, reshaping our portfolio to accelerate growth was our highest priority," V.F. Corp. CEO Steve Rendle said in a statement. "The acquisition of Williamson-Dickie is another meaningful step that delivers on that commitment and further demonstrates our focus on being an active portfolio manager to drive transformative growth for VF and value creation for our shareholders."

V.F. Corp., which said the acquisition would give immediate accretion to earnings per share and free cash flow in 2017, lifted its earnings outlook for the year.

The company raised its outlook for revenue to $11.85 billion from $11.65 billion, and earnings per share to $2.96 from $2.94. However, it cut its guidance for gross margin to 49.5% from 49.8% and operating margin to 13.7% from 14% to reflect the impact of the deal.

Further, the company expects the acquisition to add $1 billion of revenue by 2021, also lifted its long-term financial targets.

The company now expects revenue through 2021 to increase at a five-year compounded annual growth rate of between 5% and 7% to more than $15 billion, compared with its previous CAGR outlook of between 4% and 6%.

Meanwhile, V.F. now expects EPS to expand at a CAGR of between 11% and 13% to more than $5.00 by 2021, compared with its previous five-year CAGR forecast of between 10% and 12%. It expects Williamson-Dickie to add more than 25 cents to this total.

Barclays is serving as financial advisor to V.F. Corp., while Davis Polk and Wardwell LLP is acting as legal advisor.