Levi Strauss Offers $265 a Share in Stock Buyback Plan
Levi Strauss & Co., the world’s largest brand-name apparel maker, is moving ahead with a stock buyback program that would value the company at $14 billion and ensure that it would remain in family hands.
After months of planning and negotiations, the jeans and clothing maker is offering $265 per share to employees and some members of the family that owns the maker of Levi’s jeans, Dockers brand clothing and Brittania Sportswear, company spokesman Sean Fitzgerald said Friday.
That is 32% higher than the $180 valuation Morgan Stanley & Co. gave it in November 1995. And it is a huge increase in worth since the company went private in a leveraged buyout in 1985 at $50 per share.
The deal would “allow the company to remain private and family-owned for years to come,” Chief Executive Bob Haas wrote in January in a special announcement to employees.
It accomplishes that by creating a new corporate entity with a voting trust of fewer people to replace the old one.
In round numbers, family members own 95% of the stock and 1,200 employees own 3%, which would be worth more than $500 million under the buyout. Outside investors own the remaining 2%.
The buyout price was approved by the board of directors and primary shareholders, the latter being the descendants of founder Levi Strauss, during a meeting in San Francisco on Thursday.
It needs regulatory approval and financing before it becomes final in late March or early April.
While employee stock will be bought back automatically, family members have until Feb. 29 to decide what percentage of their holdings they want to dedicate to the new company and what percentage they want to cash in, Fitzgerald said.
Two years ago, Levi’s paid off the last of the $1.65 billion it borrowed to buy back shares from the public. Over the past decade, it has bought back about one-third of its privately held shares, paid out $364 million in dividends and collected a cash surplus of nearly $1 billion, according to company reports.
Family members can sell back up to one-third of their shares, but employees have to sell all of theirs. Levi will replace the employee stock ownership plan with a performance-based program.
San Francisco-based Levi earned more than $700 million on sales of about $6.5 billion in the fiscal year that ended in November.
“The acquisition is intended to keep the company privately held and family-owned for the foreseeable future,” Fitzgerald said.
Fitzgerald said the deal would allow the company to reinvest current capital and maintain its financial performance.
“We’ve determined this is the most effective way to maintain our superior financial performance and continue to operate in a manner that is consistent with our values,” he said.