Carter's to acquire OshKosh B'Gosh in $312 million deal

<p>Childrens retailer Carter's Inc. on Tuesday said it will acquire rival OshKosh B'Gosh Inc. in a $312 million deal, uniting two recognized brands into one company that will generate more than $1.3 billion in annual sales.</p><p>Carter's _ which operates 181 retail stores and sells its brand to more than 3,000 department stores _ will pay $26 in cash for each share of OshKosh stock. The deal also includes the redemption of employee stock options. The acquisition must still get shareholder and regulatory approval and is expected to close during the third quarter.</p><p>The acquisition price is below Tuesday's closing price of $29.40 for Oshkosh shares on the Nasdaq, and they declined $3.40, or 11.6 percent, to $26 in after-hours trading.</p><p>Combined with Carter's, the new company will control 352 retail store locations throughout the nation and sell its clothing to thousands of department store chains. Carter is the nation's sixth-largest branded marketer of children's apparel for ages newborn to six years old, and operates 181 retail stores.</p><p>The acquisition puts to an end speculation about the future of the venerable Oshkosh B'Gosh brand, after the company in February announced it hired investment bank Goldman Sachs & Co. to help pursue strategic alternatives. The Oshkosh, Wis.-based retailer _ which has been making clothing since the 1800s and now operates about 155 outlet and specialty stores throughout the United States _ ran into fiscal problems earlier this year when a move into adult clothing did not pay off.</p><p>"We firmly believe that Carter's will be a great steward of the OshKosh B'Gosh brand," said Oshkosh's Chairman and CEO Doug Hyde in a statement. "The price represents a premium of over 20 percent to our stock price over the twelve months prior to the speculation in the market. We are confident that this transaction will not only position OshKosh B'Gosh for a promising future but will enable the combined organization to achieve even higher levels of success over the long-term."</p><p>The deal calls for Carter's to finance the acquisition with debt, and it has received firm commitments for a multiyear bank loan from Banc of America Securities LLC and Credit Suisse First Boston. The company will refinance its bank debt and is considering the redemption and refinancing of its 10.875 percent senior subordinated notes.</p><p>The refinancing plan would result in a one-time charge of about $11.5 million, or 38 cents per share, for writing off debt issuance costs and to pay a redemption premium on the notes. Carter expects the takeover to be slightly accretive to 2005 earnings, before estimated refinancing fees of about 38 cents per share and non-cash purchase accounting adjustments of 24 cents per share. The retailer believes the deal will be accretive to earnings in 2006, after non-cash purchase accounting adjustments.</p><p>On average, analysts surveyed by Thomson Financial expect 2005 earnings of $2.03 per share on revenue of $910 million and 2006 earnings of $2.38 per share on revenue of $991.9 million.</p><p>Shares of Carter's fell $1.05, or 2.5 percent, to close at $40.95 on the New York Stock Exchange Tuesday.</p>