London Fog to merge with designer

January 13, 1994|By Lorraine Mirabella | Lorraine Mirabella,Staff Writer

As part of its strategy to expand by targeting younger customers through casual attire, London Fog Corp. said yesterday that it will merge with a leading West Coast outerwear designer.

London Fog also announced that it will close two of its raincoat manufacturing plants, including one in Washington County that employs 300 workers.

London Fog's chairman, Arnold P. Cohen, called the merger a "perfect business marriage" that would give his company -- the nation's top manufacturer of raincoats -- a bigger share of the market in outerwear sold through discount outlets and clubs. The terms of the transaction were not disclosed.

The company will merge with Pacific Trail Inc., which expects about $60 million in 1993 revenue. Pacific Trail, based in Seattle, sells men's, women's and children's outerwear through specialty and department stores and operates a ski and outdoor division serving ski specialty and sporting goods stores.

London Fog, founded in the 1920s in Eldersburg, where it is still based, sells clothing primarily through department stores, where sales increased only 1.6 percent last year, company figures show.

"We want to be the premier provider, manufacturer and distributor of outerwear and protective wear in America," said Mr. Cohen, a former president of J. Crew Group Inc. who came to London Fog as chairman and chief executive officer in August. He came to his job with hopes of expanding the company by creating upscale London Fog boutiques, selling more-expensive rainwear and buying other companies.

The new company -- which will retain London Fog Corp.'s name -- should be a more significant player in the manufacturing and retail fields, said one analyst, David Leibowitz, senior vice president of Republic New York Securities Corp.

"Both sides do bring quite a bit to the table," he said. "They bring brand names, consumer franchises, and they bring proven track records."

Pacific Trail coats and jackets will continue to be sold under that label, offering rougher textures and shorter lengths than the tailored raincoats on which London Fog built its name.

"It's got a younger attitude," Mr. Cohen said of the new line. "There's a lot to be gained by having a West Coast influence. If you travel to California, people talk differently, they have different tastes in music and food. London Fog is an East Coast business, and it's been influenced by that."

Under the agreement, London Fog will merge with PTI Holding Corp., Pacific Trail's parent company. Merrill Lynch Capital Partners Inc., which manages investment funds that control London Fog, will hold a majority stake in the merged company and in GKH Partners, which controls Pacific Trail.

Management teams of London Fog and Pacific Trail will also own part of the merged company. Some Pacific Trail managers may be relocated. The 180 employees of Pacific Trail, a 50-year-old company, will be retained by London Fog, Mr. Cohen said.

Mr. Cohen predicted that the company's annual sales in men's and women's raincoats and outer wear would grow from $350 million to $700 million in the next three years, through expansion of existing business and through mergers and acquisitions. He said the company expects to make final plans within three months for additional mergers or acquisitions that are under consideration.

London Fog has closed a 70-worker cutting facility on Brookhill Road in Northwest Baltimore. Mr. Cohen also said yesterday that London Fog will sell the two plants that will close by the end of the month in Boonsboro and in Portsmouth, Va., each of which employs 300 workers. Those two plants will close, the company said, because unionized workers failed to ratify a tentative agreement between the company and the Amalgamated Clothing and Textile Workers Union that asked for wage and work-rule concessions.

"We view this as a loss," Mr. Cohen said. "We needed a partnership with them, and they didn't understand our motives."

Officials for ACTWU in Maryland, which rejected the company's proposal in mid-December, continued negotiations through Jan. 7. They could not be reached for comment.

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