HANES TO ACQUIRE AUSTRALIA’S PACIFIC BRANDS FOR $800 MILLION IN CASH
HanesBrands has entered into a definitive agreement to acquire leading Australian underwear and intimate apparel company Pacific Brands Limited in an all-cash transaction valued at US$800 million.
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 number one or number two market share position for underwear, intimate apparel or hosiery.
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 AUD800 million (US$600 million) and adjusted operating profit of AUD75 million (US$56 million). The Melbourne-based company, which has a June fiscal year end, sells primarily in Australia with some distribution in New Zealand, the United Kingdom and Asia.
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 Hanes does not consider part of Pacific Brands’ core. Combined, they account for 12 percent of sales and operating profit (excluding corporate overhead allocation). Hanes is not including sales and profits for those businesses in its long-term projections.
The acquisition is expected to result in significant savings through the use of Hanes’ large-scale, low-cost global supply chain. Pacific Brands sources the significant majority of its underwear and intimate apparel production from third-party manufacturers, while Hanes relies primarily on company-owned manufacturing. The acquisition also would add to Hanes’ global product design, development and innovation capabilities that span the Americas, Europe and the Pacific Rim.
“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,” said Richard A. Noll, chairman and CEO of Hanes. “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 United States to a $7 billion global underwear and activewear powerhouse spanning the Americas, Europe and Asia-Pacific. This foundation will serve as a catalyst for even further growth and value creation for the foreseeable future.”
“Pacific Brands, led by a top-notch management and marketing team, will make a significant addition to our worldwide portfolio of leading brands,” said Gerald W. Evans Jr., chief operating officer of Hanes. “We believe we can make meaningful contributions to the continued execution of the Pacific Brands growth strategy and support it with our world-class low-cost supply chain. This will also add geographic scale that will benefit our existing Champion Australia business.”
The definitive purchase agreement has been unanimously approved by the boards of directors of both companies. The acquisition, which is subject to Pacific Brands shareholder approval and other customary closing conditions, is expected to close in the third quarter of 2016. Goldman, Sachs & Co. is serving as exclusive financial advisor to Hanes, while Baker & McKenzie is serving as legal counsel.
