Pacific Brands announced that it has entered into three unconditional agreements to
sell its Brand Collective business in the Footwear, Apparel and Sport
categories.

The deals are expected to be completed on or around 1 December 2014:

  • Footwear and Apparel will be sold to Australian private equity firm
    Anchorage Capital Partners. Owned brands, including Grosby, Julius
    Marlow and Volley, as well as licensed brands Clarks, Hush Puppies,
    Mossimo and Superdry, and the Iconix Joint Venture will transfer with
    the business
  • Sport brands Dunlop and Slazenger will be sold to
    IBML, a division of UK-based Sports Direct International Plc, who owns
    these brands outside Australia and New Zealand. The Everlast equipment
    licence from IBML to Brand Collective will be terminated in connection
    with the sale
  • Sport assets related to the Sport business, including
    Everlast equipment, will be sold to Designworks, a division of
    Australian listed company The PAS Group who will license the Dunlop,
    Slazenger and Everlast brands from IBML

Pacific Brands wants to sharpen its focus on its largest businesses – underwear brands Bonds and Berlei, plus Sheridan manchester and Tontine bedding.

Gross proceeds from the
transactions of approximately A$39 million, on a cash and debt free
basis, will be applied to further reduce net debt. The carrying value of
related net assets to be disposed is expected to be approximately A$66
million at completion. Subject to cost of disposal and completion
adjustments, Pacific Brands expects to recognise a loss on sale of
approximately A$30 million in the financial year ending 30 June 2015.

In
the financial year ended 30 June 2014, the Brand Collective business
reported total sales of A$204.5 million and an EBIT loss of A$22.3
million (reported) or A$0.9 million before significant items. An element
of corporate and shared services costs allocated to the Brand
Collective business will be unrecovered following full transition of the
business, estimated to be approximately A$2 million per annum net of
savings from associated restructuring initiatives.
Pacific Brands
Chief Executive Officer David Bortolussi said: The sale of the Brand
Collective business is consistent with our strategy to simplify and
focus Pacific Brands on maximising the potential of our market leading
brands such as Bonds and Sheridan.

While this has been a complicated
divestment to execute, the transactions are all unconditional and
should be completed within two weeks with minimal disruption to
customers and our core business. From a pricing perspective, the
divestment represents good value to our shareholders for an unprofitable
division.

This transaction also represents the conclusion of the
strategic review. The divestments of Workwear and Brand Collective will
dramatically simplify Pacific Brands and significantly improve the
overall quality and growth prospects of the brand portfolio.

We will
continue to consider other options to build shareholder value including
further investment in our brands, wholesale partnerships, retail
stores, online, category expansion and international distribution.

In a separate statement, The PAS Group Limited announced that it has signed new licensing agreements with global brand owner International Brand Management & Licensing (IBML) for the distribution of sports equipment and footwear for the Everlast, Slazenger and Dunlop brands in Australia and New Zealand through its subsidiary Designworks Clothing Company Pty Ltd (Designworks).

Under an existing licensing agreement with IBML, Designworks has already had early success in distributing apparel under the Everlast and Slazenger brands through discount department stores such as Kmart and Big W. The new agreements extend the product range for these two brands to include sports equipment and footwear. Under a separate agreement, Designworks will design and distribute apparel, footwear and sports equipment under the Dunlop brand.

A new equipment division has been created at Designworks with the new products to be launched during the second half of the current financial year through its discount department store and specialty store network.

The new licensing deals with IBML does not relate to the sale of the Brands Collective business by Pacific Brands to a third party. However, Designworks will acquire Pacific Brands Everlast, Dunlop and Slazenger equipment and footwear inventory.

Eric Morris, Chief Executive Officer of PAS commented: Part of our strategy is to expand our product offering through new and existing brand licenses and broaden distribution for our wholesale business. As a continuation of our strong strategic relationship with IBML, this deal expands our product range for Everlast and Slazenger following encouraging apparel sales since their recent launch, and adds the Dunlop brand to our portfolio. It will leverage the considerable design and product development expertise we have in the Designworks business.