W Acquisition and Warnaco Agree on $488-Million Deal : Apparel Maker OKs Buy-Out by Encino Investor Group

Warnaco agreed Friday to be bought for about $488 million in cash by W Acquisition, a four-person Encino investment group that tenaciously pursued it for about six weeks.

The two main partners in W Acquisition--Andrew Galef, 53, a longtime business consultant, and Linda Wachner, 40, former president of the Max Factor cosmetics firm--quickly took control of the Bridgeport, Conn., apparel firm.

Warnaco’s board named Galef as its new chairman and Wachner, who is expected to run the company, as its president during the afternoon meeting in which it accepted W Acquisition’s $46.50-a-share offer.

Analysts and takeover specialists expressed surprise at the price that W Acquisition agreed to pay.

They added, however, that the company’s value is difficult to assess because its most valuable assets are its brand names, which include Olga lingerie, Hathaway shirts and White Stag women’s sportswear.

“Can anyone say what a Hathaway patch or a White Stag logo is worth?” asked Barry Lucas, who follows Warnaco for the Raymond James & Associates brokerage firm in St. Petersburg, Fla.

Wachner, who worked as a vice president in Warnaco’s lingerie division in the mid-1970s, said she would not discuss her plans in detail until she has time to evaluate the company.

Warnaco Runs Out of Options

The acquisition agreement came after Warnaco postponed a shareholder vote scheduled for Friday on a recapitalization plan designed to head off W Acquisition’s bid. Warnaco’s offer would have given shareholders a package of cash, notes and stock worth about $45 a share.

The company reconsidered its proposal and canceled the vote, however, after W Acquisition offered Thursday to raise its bid to $46.50 a share from $44 if it could acquire enough Warnaco stock to gain control.

Warnaco, which reported a profit of $22.5 million on revenue of $591.3 million last year, apparently had run out of options. W Acquisition disclosed early Friday that it had been tendered about 6 million shares, which would have given it a stake of nearly 60% in the firm, under its previous $44-a-share offer.

Currently, Warnaco has 10.2 million shares outstanding, of which 113,000 already are owned by W Acquisition.

In an interview, Galef said his group probably will have to purchase 10.5 million Warnaco shares for $488.25 million to complete the buy-out because of stock options held by Warnaco managers. He predicted that the deal will be completed within 20 days.

Galef said he will meet Monday with Robert J. Matura, his predecessor as chairman of Warnaco. Analysts said they expect Matura to leave the company.

The two other partners in W Acquisition are Frank A. Grisanti, 65, and Jeffrey S. Deutschman, 29, both executives in Spectrum, a Galef-led management firm in Encino.

W Acquisition originally bid $36 a share for Warnaco on March 17, when the company’s managers were trying to arrange a buy-out that would have paid stockholders about $33.50 a share.