HanesBrands has entered a definitive agreement to acquire Pacific Brands Limited, an underwear and intimate apparel company in Australia. The transaction is valued at roughly $800 million, and the acquisition is expected to close in the third quarter of this year. This is Hanes’ sixth acquisition in the past three years.
“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,” CEO Richard A. Noll says in a press release. He notes that Winston-Salem, NC-based Hanes has tripled operating profits in the last decade, going from a $4 billion company to a $7 billion global “underwear and activewear powerhouse.” The Pacific Brands acquisition will “serve as a catalyst for even further growth and value creation for the foreseeable future,” Noll adds. HanesBrands recently posted positive Q1 earnings of $1.22 billion.
Hanes projects that under its ownership the publicly traded Pacific Brands will have net sales in its core Underwear and Sheridan businesses of around $600 million in 2016. The Melbourne-based company sells primarily in Australia with some distribution in New Zealand, the United Kingdom and Asia.
The all-cash transaction is expected to deliver full benefits within three years, attaining adjusted operating profit of approximately $100 million.
Pacific Brands has three business units – Underwear, Sheridan, and Tontine & Dunlop – but Hanes intends to divest the non-core Tontine pillow business and Dunlop Flooring business. Combined, those businesses account for 12% of Pacific Brands operating profit, but Hanes did not include profits from those businesses in its long-term projections.
Pacific Brands’ core businesses of Underwear and Sheridan have a combined two-year compound annual sales growth rate of around 8%.
The acquisition is expected to result in significant savings through the use of Hanes’ low-cost global supply chain. “Pacific Brands, led by a top-notch management and marketing team, will make a significant addition to our worldwide portfolio of leading brands,” says Gerald W. Evans Jr., chief operating officer of Hanes. “We believe we can make meaningful contributions to the continued execution of the Pacific Brands growth strategy and support it with our world-class low-cost supply chain. This will also add geographic scale that will benefit our existing Champion Australia business.”