Gildan Activewear Inc. has entered into an agreement to purchase 100% of the capital stock of V.I. Prewett & Son, Inc., a large U.S. private label supplier of basic family socks to U.S. mass-market retailers, which is located in Fort Payne, Alabama. The initial purchase price is $125 million, with further contingent payments of up to $10 million. The purchase consideration will be paid in cash and will be financed out of Gildan's revolving bank credit facilities. The acquisition of Prewett, which is subject to U.S. regulatory approvals, is expected to close around the end of October 2007.
Gildan and Prewett believe that the combination of the two companies will enhance the global cost-competitiveness of Prewett's basic athletic sock programs, and result in significant cost reduction synergies. At the same time, the companies have jointly developed an integration plan designed to ensure the continuation of Prewett's capabilities and reputation for outstanding customer service to mass-market retailers and to further strengthen Gildan's positioning as a full-product supplier of socks, activewear and underwear for the retail channel.
Prewett currently has annualized sales of approximately $190 million. The acquisition of Prewett is expected to be accretive to Gildan's EPS in fiscal 2008, and to increase annual EPS by approximately 20 cents per share after the acquisition integration is complete. Based on the projected first year accretion from the Prewett acquisition, and a $7 million further incremental capacity expansion of Gildan's first Honduran sock manufacturing facility, Gildan now expects to achieve or exceed the high end of its previously announced earnings guidance range for fiscal 2008 of $1.80 to $1.85 per share, representing an increase of over 40% compared with the company's fiscal 2007 projected EPS of approximately $1.30 before restructuring charges.