By Uday Sampath Kumar
(Reuters) - VF Corp, one of the world's biggest apparel makers, will spin off Lee and Wrangler jeans into a separate public company, it said on Monday, allowing it to focus on more profitable Vans sneakers and The North Face outdoor wear.
Denims were responsible for more than half of VF's overall profit in 2000, but have since been outpaced by skateboarder favorite Vans, which has driven much of VF's recent growth.
The spin-off will also give VF more flexibility to pursue acquisitions, explore new business areas and focus more on activity-based outdoor products, a business that saw profit jump 15 percent in the year that ended in March.
Earnings from jeans slipped nearly 13 percent in the same period as big outlets including Walmart Inc increasingly stock their own denim brands.
"(Jeans) has been the weak link in the portfolio," Jane Hali, CEO of investment research firm Jane Hali & Associates, said via email. "Now they can concentrate on the outdoor coalition and Vans, a much more unified and strong stable of brands."
VF already sold off apparel brand Nautica last year to focus on faster-growing names. The new VF will have annual revenue of more than $11 billion, compared to just over $2.5 billion for the jeans unit.
The jeans company will focus on maintaining shareholders' dividend, cutting debt and increasing sales in China and other Asian markets. Acquisitions of smaller firms are a longer-term possibility, VF said.
VF will shift base to Denver while the still-to-be-named jeans maker will move to the company's traditional base in Greensboro, North Carolina and be led by Scott Baxter, currently president of VF's Americas West group.
Baxter led VF's jeans business from 2011 to 2015.
VF, which has a market value of about $38 billion, projected a 5-cent hit to current-quarter earnings per share due to the deal.
Its shares fell nearly 4 percent to $92.53 on Monday morning.
VF had considered "all options" for the jeans business including an outright sale, but decided that a spin-off would serve shareholders best, executives said on a conference call with analysts.
Barclays was VF's financial adviser while Davis Polk and Wardwell LLP provided legal counsel.
(Reporting by Uday Sampath in Bengaluru; Editing by Sai Sachin Ravikumar)
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