HanesBrands, a global apparel company, has signed a definitive agreement to sell the intellectual property and certain operating assets of its global Champion business to Authentic Brands Group (“Authentic”). The deal is valued at $1.2 billion, but it could be worth up to $1.5 billion if a further $300 million in contingent cash consideration is received, subject to meeting certain performance requirements. The HanesBrands Board of Directors has unanimously approved this agreement, marking the successful conclusion of the company’s previously announced evaluation of strategic options for the global Champion business.
HanesBrands has made significant strides in recent years to revitalize its innerwear business, expand market share, attract younger consumers, and enhance its operating model. Following the completion of the transaction, the company plans to concentrate on reinforcing its leadership in the innerwear category and achieving above-market growth. This will be driven by ongoing consumer-focused product innovation and increased investment in its portfolio of leading brands, including Hanes, Bonds, Maidenform, and Bali.
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Bill Simon, Chairman of the Board, stated, “After a comprehensive review of options for the global Champion business with our financial and legal advisors, we are pleased to have reached an agreement with Authentic Brands Group. We believe this agreement maximizes value for Champion and best positions HanesBrands for long-term success. Importantly, this transaction will enable the company to accelerate debt reduction while positioning HanesBrands to achieve consistent growth and cash flow generation. We will focus on advancing our leading innerwear brands and optimizing our world-class supply chain.”
“Today’s announcement is the result of significant efforts by our teams to position all of our brands for future success,” said CEO Steve Bratspies. “Over the past three years, we have implemented the necessary adjustments to enhance the company’s operations and financial results. These changes include lowering debt levels, cutting costs, restoring historical gross margins, and producing steady cash flow.
The successful completion of this transaction further simplifies our business, reduces our leverage, and enhances our operations and financial performance. As we embark on the next chapter for HanesBrands, we believe we are in an even stronger position to extend our leadership in innerwear, pursue new cost reduction opportunities, ensure the right operating structure, and advance our multi-year strategy to drive strong shareholder returns.”
Operational Transition Plan
The deal is expected to close in the second half of 2024, subject to usual closing conditions. Following the closing, HanesBrands will offer certain transition services for Champion, including operating the business in select regions during a transition period.
The company anticipates that the acquisition will generate net proceeds of around $900 million, excluding the contingent cash consideration and accounting for working capital adjustments and other typical transaction costs. The company expects significant deleveraging on a net debt-to-adjusted EBITDA basis and will use all net proceeds from the deal to accelerate its debt reduction in line with HanesBrands’ commitment to debt reduction.
As of the end of the first quarter of 2024, the global Champion business generated approximately $75 million of adjusted EBITDA on a trailing 12-month basis, after accounting for around $60 million in stranded costs. The company has specific plans to eliminate all stranded costs within a year of the transaction closing as it completes the business transition.
The company plans to classify Champion as discontinued operations in the second quarter of 2024. Consequently, it expects to update its full-year 2024 guidance alongside the release of its second-quarter earnings results.
Financial Advisors and Legal Counsel
Goldman Sachs & Co. LLC and Evercore are acting as financial advisors to HanesBrands, while Kirkland & Ellis LLP and Jones Day are providing legal counsel.
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