HanesBrands intends to acquire DBApparel of France from Sun Capital Partners, Inc., provided consultation with European and French works councils representing DBA employees is completed and customary closing conditions are met.
DBA is a leading marketer of intimate apparel, hosiery and underwear in Europe, new geography for Hanes. The all-cash transaction would be accretive to adjusted earnings per share in the first 12 months after closing, including an estimated $0.25 of adjusted EPS excluding actions in 2015. With the realization of full benefits in three to four years, the acquisition would add, on an annual basis, more than $875 million in net sales, approximately $125 million in adjusted operating profit excluding actions, and approximately $1.00 in adjusted EPS excluding actions.
Hanes’ transaction offer values DBA at €400 million on an enterprise basis (approximately $550 million at current exchange rates), or approximately 7½ times EBITDA. Hanes intends to fund the acquisition with cash on hand and third-party borrowings. The post-synergy multiple is expected to be less than 4 times EBITDA. The acquisition could close as soon as the third quarter 2014.
Hanes and DBA were formerly separate sister companies under the ownership of Sara Lee Corporation. In 2006, Sun Capital acquired DBA and Hanes spun off into an independent public company. Together, the two companies would be one of the largest basic innerwear apparel companies in the world and share the worldwide rights to the Playtex, Wonderbra and DIM brands.
“Purchasing DBApparel would represent another great acquisition for Hanes and a good use of our ample cash flow to generate significant shareholder value,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “We will be able to reunite two great companies to create significant growth and margin-expansion opportunities. Together, we will be a nearly $6 billion company utilizing our disciplined Innovate-to-Elevate strategy and leveraging our global supply chain.”
DBA’s product offerings mirror those of Hanes’ Innerwear segment, and the company is a leader across Western and Central Europe where Hanes does not have a material presence. DBA sells intimate apparel, hosiery, and men’s underwear, with nearly half of total company sales coming from intimate apparel. DBA is No.1 in market share for intimate apparel in France and Spain and No. 2 in Italy; No. 1 in men’s underwear in France and Spain; and No. 1 in hosiery in France and Germany.
DBA sells innerwear in 16 countries, primarily in Western and Central Europe. Approximately 45 percent of company sales are in France, while the Germany/Austria market accounts for approximately 15 percent of sales. Italy, Spain and Portugal together account for another 20 percent of sales.
DBA’s strong brands include DIM, Playtex and Wonderbra in multiple countries. DIM accounts for approximately 50 percent of all sales. Strong national brands include Nür Die hosiery in Germany, Lovable intimate apparel in Italy, and Abanderado men’s underwear in Spain.
There are significant opportunities to leverage the increased scale of the combined company and global supply chain. DBA utilizes a mix of self-owned manufacturing and sourcing from third-party manufacturers.
Like Hanes, DBA self-manufactures the significant majority of its hosiery products, with production facilities in France, Germany, Slovakia and Romania. However, DBA outsources the production of approximately 75 percent of its intimate apparel and underwear, whereas Hanes owns significant intimate apparel and underwear production around the world.
“DBA is a great company with an outstanding management team and world-class employees,” said Gerald W. Evans Jr., Hanes’ chief operating officer. “The company is well-run, a market leader, and mirrors our Innerwear business. We are looking forward to welcoming the DBA team to Hanes. Together, we have the world’s best innerwear brands, the most knowledgeable employees in the industry, and the size and passion to be the best basic apparel company in the world.”
Advisors
J.P. Morgan Securities LLC is serving as exclusive financial advisor to Hanes. Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel to Hanes.
