Ocean Pacific Apparel Corp., the Irvine-based clothier that once epitomized the country’s surfing craze, will be acquired by Warnaco Group Inc., the companies said Wednesday.
Warnaco — the New York-based maker of Speedo swimsuits, Olga bras and Calvin Klein jeans — will pay the investment group Doyle & Boissiere Fund I $40 million and assume $1 million in debt if regulators approve the deal.
Warnaco said it was attracted to Ocean Pacific’s “brand equity.”
Founded in 1972 by surfboard maker Jim Jenks, Ocean Pacific, along with San Diego-based Hang Ten, gained fame by taking the Southern California surf look national. Ocean Pacific’s signature corduroy shorts were must-wears for young men in the 1970s.
At its peak, before debt and competition forced it to seek Bankruptcy Court protection 12 years ago, Ocean Pacific’s sales from worldwide licensing operations topped $400 million.
Under Warnaco, Ocean Pacific headquarters will remain in Irvine and none of its 23 employees is likely to be laid off, the companies said.
Analysts applauded the deal. In a note to investors, Randall Scherago of First Albany Capital wrote that Ocean Pacific’s surf and beach products “should extend Warnaco’s stable of strong brands into the California lifestyle.”
Paul Altman, vice president of the Sage Group, which advised Ocean Pacific on the deal, said Warnaco’s infrastructure and expertise should help expand Ocean Pacific’s swimwear and sportswear lines, providing “the resources to take the brand to the next level.”
Ocean Pacific is the latest youth-market-oriented company to exchange independent roots for corporate security. In March, skate-shoe maker DC Shoes agreed to be acquired by Quiksilver Inc.; earlier this summer, shoemaker Vans Inc. was purchased by VF Corp. In 2002, skateboard-giant Kubic Marketing Inc. was snapped up by Globe International Ltd. and Nike Inc. purchased Hurley International, which makes clothes for skaters and surfers.
Jeffrey P. Klinefelter, an analyst with PiperJaffray, said sporty youth brands were good investments. “That board sport lifestyle is becoming more and more mainstream every year,” he said, making companies like Ocean Pacific “very compelling.”
The clothes maker’s casual “Ocean Pacific” line for men and women is sold in department stores, while the more upscale “Op” collection is available in surf shops and retailers like Barneys New York.
“The next window is obviously the growth opportunity to get it to the next level,” said Ocean Pacific President Richard Baker, who is set to remain with the company.
Doyle & Boissiere Fund purchased the controlling interest in Ocean Pacific in 1998 from San Francisco-based Berkeley International Capital Corp. Berkeley acquired Ocean Pacific’s assets in 1993, a year after Ocean Pacific filed for Chapter 11 bankruptcy reorganization. Warnaco itself emerged from Chapter 11 last year; it had filed in 2001, unable to pay debts from acquisitions and licensing agreements.
“There’s a bit of a double Cinderella story here,” Altman said.
Warnaco released its second-quarter earnings after the markets closed Wednesday. Net income was $4.4 million, or 10 cents a share, compared with a loss of $9 million, or 20 cents a share, in the same period in 2003.
Shares of Warnaco fell a quarter to close at $18.06 on Nasdaq. They added more than 35 cents in after-hours trading.