Kontoor Brands estimates the Lee sale produced $698.2 million in pretax closing cash, clarifying the proceeds after adjustments to the purchase agreement.
The estimate appears in unaudited pro forma financial statements attached to Kontoor’s Nov. 6 Form 8-K filing with the U.S. Securities and Exchange Commission. The sale closed Nov. 2, transferring the Lee business to ABG-Storm LLC, an affiliate of Authentic Brands Group.
The $698.193 million estimate reflects purchase-agreement adjustments for cash, indebtedness and net working capital, as well as a $62.3 million restructuring holdback. Kontoor said final cash proceeds may differ materially if the cash, indebtedness or net working capital figures change. Any later cash from the earnout or release of the holdback would be additional to the closing amount. The estimate is about $51.8 million below the stated $750 million cash component, reflecting the adjustments and holdback.
The SEC filing describes the purchase agreement’s original terms as a $750 million cash payment at closing, subject to adjustments, plus a performance-based earnout of up to $250 million over five years. Announced in May, the deal had a maximum stated value of $1 billion. An earnout is a later payment tied to future results, so the amount was not fixed at closing. Kontoor assigned the potential earnout an estimated fair value of $77 million as of Nov. 2, an accounting valuation rather than a guaranteed payment.
The sale also affects Kontoor’s obligations under its senior notes indenture. The filing said the indenture requires net proceeds from a significant asset sale to go toward debt reduction or reinvestment within 540 days. Kontoor said it had already applied part of the proceeds to debt and expected to meet the requirement.
The company also anticipated a $400 million accelerated share repurchase and $50 million in open-market share repurchases. The filing gave no execution date for either plan.
