Tommy Hilfiger hoists 'for sale' sign in $1.5bn auction

The all-American fashion retailer, Tommy Hilfiger, has put itself up for sale in an auction likely to raise more than $1.5bn (£840m).

The company, founded by the US designer of the same name, is understood to have been approached in the past few months by a potential buyer. Shares in Hilfiger shot up 15 per cent higher to $18.55 yesterday on various reports which said that while the initial approach did not result in a deal, the company will now consider bids from private-equity firms and other retailers.

Hilfiger is understood to have hired JP Morgan to handle the auction. The investment bank would not comment. The move comes after Hilfiger, which is based in Hong Kong, ended an 11-month federal investigation by agreeing last week to pay a total of $18.1m in back taxes and interest.

The settlement removed a cloud that has hovered over the company since September, when news of the inquiry sent shares tumbling to below $9 a share from more than $14.

Potential buyers include Jones Apparel, whose brands include Nine West and Anne Klein, and Liz Claiborne. Both focus mainly on women's clothes and could use an acquisition of Hilfiger to get into menswear.

Hilfiger, which has suffered from a decline in revenues, says on its website its clothes are meant to convey "the spirit of the American dream". It has been restructuring over the past two years after closing most of its speciality stores and cutting back some of its wholesale distribution.

The company, which started as a retailer of men's jeans and sportswear, has expanded to include clothes for women and children, as well as perfume, glasses, shoes and home furnishings.

In its full year ended 31 March 2005, net revenues fell 5 per cent to $1.78bn. The decline reflected the fact that US sales have slowed in clothing for men, women and children. Europe sales are still enjoying growth.

A sale of Hilfiger, which has a market capitalisation of $1.5bn and is debt-free, would be the latest example of consolidation among retailers. Federated Department Stores, which owns Bloomingdale's and Macy's, agreed to buy its rival May, the owner of Lord & Taylor's and Marshall Field's, for $11bn in February.