HanesBrands acquires Pacific Brands from Australia

HanesBrands has finalized the deal to acquire Pacific Brands, 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 including the United States, Canada, Mexico, Brazil, France, Germany, Italy, Spain, and South Africa, where the company holds significant market share for underwear, intimate apparel or hosiery categories.

“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, adding, “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 four billion dollars company concentrated in the United States to a seven billion dollars global underwear and activewear powerhouse spanning the Americas, Europe and Asia-Pacific.”

Pacific Brands’ net sales pegged at 600 mn dollars for 2016

HanesBrands projects that under its ownership Pacific Brands would have calendar 2016 net sales in its core underwear and sheridan businesses of approximately 800 million Australian dollars (600 million dollars) and adjusted operating profit of 75 million Australian dollars (56 million dollars). 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 800 million dollars on an enterprise-value basis, or slightly more than 10 times projected calendar 2016 EBITDA for all businesses, and would pay Pacific Brands shareholders 1.15 Australian dollars (1.98 dollars) per share. The transaction is expected to deliver full benefits within three years, attaining adjusted operating profit of approximately 100 million dollars, contributing approximately 0.25 dollar to Hanes’ adjusted EPS.

Restructured Pacific Brands focuses on underwear for growth

Pacific Brands has three business units – Underwear, Sheridan, and Tontine & Dunlop. Hanes intends to divest the Tontine pillow business and Dunlop Flooring busines. 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 percent.

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. Underwear has a three-year compound annual sales growth rate of 7 percent. The company’s biggest underwear brand is Bonds and the Berlei brand of premium bras is sold in department stores. Bonds sales have increased 40 percent since 2013. In the first half of fiscal 2016, retail sales at Bonds stores increased 39 percent, driven by store openings and 22 percent comparable-store sales growth.

The Sheridan business, which accounts for a quarter of the core business, has benefited from newly combined infrastructure with the Underwear group. Sheridan markets luxury linens, towels, bedding accessories, and loungewear in the retail and wholesale channels and has recently launched babywear.