Winston-Salem - Hanesbrands has entered into a definitive agreement to acquire Pacific Brands Limited, one of best known underwear and intimate apparel companies 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 number one or two market share position for underwear, intimate apparel or hosiery.
The countries include the United States, Canada, Mexico, Brazil, France, Germany, Italy, Spain, and South Africa.
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.
The transaction is valued at approximately US$800 million on an enterprise-value basis, or slightly more than 10 times projected calendar 2016 EBITDA, and would pay Pacific Brands shareholders AUD1.15 per share.
“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 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 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 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. The Underwear group is successfully executing growth strategies to reshape its wholesale business, expand distribution, and increase retail and online sales. The group operates more than 150 company retail stores and retailer shop-in-shops.
The company’s biggest Underwear brand is the fast-growing Bonds, an iconic century-old brand that holds the number one market share for men’s underwear, women’s underwear, children’s underwear, babywear and socks, as well as the number position in bras.
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.