Here's Why We Broke Our Six-Year Acquisition Hiatus to Buy Dickies: VF Corp. CEO
Dickies will give VF more exposure to hardcore workers.

VF Corp. (VFC) just planted a big flag in the ground. 

On Monday, VF, once known for its robust rate of acquiring companies, announced its first major purchase after taking a six-year hiatus from deal-making. The company plans to buy Williamson-Dickie Manufacturing Co., the maker of Dickies work apparel, for $820 million in cash.

"We're excited about this announcement today. The Williamson-Dickies company is a really interesting business and we see a great opportunity to build on it," Steven Rendle, VF chairman, president and CEO, said in an interview with TheStreet on Monday.

VF investors have been itching for the company to score a deal since its last blockbuster $2.3 billion purchase of boot-maker Timberland was made in 2011. In recent years, VF has been focused on integrating its existing brands rather than gaining new ones. But, it began shifting that approach earlier this year with a renewed commitment to M&A.

VF, headquartered in Greensboro, said Monday's deal, subject to approval, is expected to add $1 billion in revenue by 2021, allowing it to eventually reach $15 billion in sales. It will provide immediate accretion to 2017 earnings per share and free cash flow, too. 

Fort Worth, Texas-based Williamson-Dickie designs, manufactures and sells its work apparel through a network of retail partners, owned stores, online sites and franchisees. Its brands include Dickies, Workrite, Kodiak, Terra and Duxbak. Williamson-Dickie was founded in 1922 by the family of Philip Williamson, the company's chairman and CEO.

TheStreet talked with Rendle, who was appointed to the CEO position on Jan. 1, over the phone on Monday. Here's a condensed and edited version of our conversation.

Steve Rendle, VF CEO.
Steve Rendle, VF CEO.

Question: Does this deal represent a big bet on the American worker?

Answer: We see an opportunity to take our deep understanding of the consumer and marry that to what we see is a change in trajectory in the work space. We're not just servicing the traditional, construction, oil and gas type businesses but Williamson-Dickie gives us access to the service sector and the medical sector where there's an even higher rate of growth. We have the ability, together, to access this consumer with our joint portfolio, combining our high-touch service and delivery capabilities to really move into this highly-fragmented marketplace with a consistent, focused strategic approach to servicing this consumer at a much higher degree.

Also, more than 35% of Dickies' business is international. It is an area where we do not have a deep penetration from a market standpoint. This is not just a big bet on the U.S. worker, but the global worker. We think we can really be a disruptive force with a very powerful message that puts us in the forefront of consumers' decisions.

Q: In your time spent studying who your consumers are, have you seen any demographic shifts in who your main consumers are now from who they were let's say 10 years ago?

A: I don't know that we've seen a change in the demographic makeup. What we do see is a consumer that values strong brands that bring good durability, high value but also can bring products that they appreciate and make up who they are as workers and that go beyond the environment that they work in everyday. We have, and will continue to have, a fairly high focus on the female consumer. We will be launching a campaign around helping women enter into the construction workplace. We'll make products specifically for females in terms of function, form and aesthetic.

Q: What attracted you to Williamson-Dickie?

A: In terms of seeing acquisitions, there's a strategic lens and a financial lens. The acquisition should access new consumer segments, bring in new capabilities, have synergies and also be a billion-dollar brand opportunity. Dickies touched every one of those boxes. But it's also a powerful brand with strong awareness, it carries about 90% awareness to its core consumer. That is a very unique brand.

Q: Did VF's renewed commitment to making acquisitions come from you and can we expect more in the near future?

A: I wouldn't say that it is just me. I get the benefit of being the CEO who gets to talk about it but we've always been acquisitive, which is the most productive use of our balance sheet. We took our time coming out of that Timberland acquisition in integrating that brand. It was the biggest acquisition we've ever done. But we did have a dry spell. We understood that our investment community viewed us as not acting on something we said was one of our core strengths and there was a question around management's credibility. We took that to heart.

We're committed to drive against this integrated strategy and be able to give proof points that we're activating strategy, methodically and consistently with the intention of delivering mid-teens total shareholder returns. This is just another proof point along this journey and we intend to give you many more in the coming months and years.

Q: In thinking about the current depressed state of the retail industry, what are your plans for growing Williamson-Dickie in terms of store openings?

A: When we talk about how we view the consumer marketplace, we use a visual example of an hour glass. We see the premium aspect of retail performing and the value end on the bottom of that hour glass performing. It's that middle section being most negatively impacted. Only about 6% to 7% of our revenue comes from the mid-tier department-store segment. Our strategy has been built to allow our enterprise to grow inside this hour glass. We use our deep understanding of our consumer to assemble a portfolio of brands, our B to C digital platform, for example, as an opportunity to speak directly to the consumer. But in also partnering with the strong retail partners that we have on both sides of the spectrum, we can drive growth.

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