Apr 28, 2016
HanesBrands to buy Australian underwear company Pacific Brands
Apr 28, 2016
HanesBrands, a leading worldwide marketer of underwear, intimate apparel and activewear, has announced that it has entered into a definitive agreement to acquire Pacific Brands Limited, the leading underwear and intimate apparel company in Australia.
The acquisition would be Hanes’ sixth in the past three years and would add Australia and New Zealand to the list of countries where the company holds the No. 1 or No. 2 market share position for underwear, intimate apparel or hosiery. The countries include the US, Canada, Mexico, Brazil, France, Germany, Italy, Spain, and South Africa, the company said in a press release.
HanesBrands projects that under its ownership publicly traded Pacific Brands would have calendar 2016 net sales in its core Underwear and Sheridan businesses of approximately 800 million Australian dollars ($600 million) and adjusted operating profit of AUD75 million ($56 million). The Melbourne-based company, which has a June fiscal year end, sells primarily in Australia with some distribution in New Zealand, UK, and Asia.
The transaction is valued at approximately $800 million on an enterprise-value basis, or slightly more than 10 times projected calendar 2016 EBITDA (for all businesses), and would pay Pacific Brands shareholders AUD1.15 per share.
The all-cash transaction is expected to be immediately accretive to adjusted earnings per share and deliver an after-tax internal rate of return in the mid-teens. It is projected to deliver full benefits within three years, attaining adjusted operating profit of approximately $100 million, contributing approximately S$0.25 to Hanes’ adjusted EPS.
“Pacific Brands is a natural addition to the HanesBrands portfolio with its strong market-leading brands that will be complemented by our global supply chain,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “In the span of 10 years, we have transformed the company through acquisitions and our Innovate-to-Elevate initiatives. We have tripled operating profits and expanded from a $4 billion company concentrated in the US to a $7 billion global underwear and activewear powerhouse.”
Pacific Brands has three business units – Underwear, Sheridan, and Tontine & Dunlop. The company has undergone significant restructuring over the past two years to streamline its portfolio to focus on the core Underwear and Sheridan businesses.
Hanes intends to divest the Tontine pillow business and Dunlop Flooring business, which it does not consider part of Pacific Brands’ core. Combined, they account for 12 per cent of sales and operating profit (excluding corporate overhead allocation). Hanes is not including sales and profits for those businesses in its long-term projections.
Pacific Brands’ restructuring and focus on Underwear and Sheridan has resulted in significant sales and profit growth. Based on fiscal 2016 expectations, the core businesses have a combined two-year compound annual sales growth rate of approximately 8 per cent.
Of the core business, Underwear accounts for three-fourths of sales and includes underwear, bras, socks, hosiery, babywear and outerwear.
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