HanesBrands has entered into a definitive agreement to acquire Pacific Brands Limited, and underwear and intimate apparel company in Australia.
Article continues below
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 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 ($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, the United Kingdom 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 $0.25 to Hanes’ adjusted EPS.
Underwear has a three-year compound annual sales growth rate of 7 percent.
The company’s biggest Underwear brand is the fast-growing Bonds, an iconic century-old brand that holds the No. 1 market share for men’s underwear, women’s underwear, children’s underwear, babywear and socks, as well as the No. 3 position in bras.
In addition, the Berlei brand of premium bras sold in department stores is No. 2 in overall bra market share and No.1 in sports bras.
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. ■