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Hanesbrands to return to European market with $544 million acquisition

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WINSTON-SALEM, N.C. — Hanesbrands Inc. plans a major return to the European apparel market through a $544 million purchase of DBApparel of France, according to the Winston-Salem Journal.

DBApparel is a leading marketer of intimate apparel, hosiery and underwear, similar in product scope to Hanesbrands. Its most known brand is DIM, which accounts for 50 percent of its sales, or about $438 million annually. It also carries the Playtex and Wonderbra brands that Hanesbrands sells.

The deal was announced Wednesday and represents a back-to-the-future acquisition of sorts for Hanesbrands, considering the two companies were owned by Sara Lee until DBApparel was sold to private-equity group Sun Capital Partners in 2006.

That was the same year Hanesbrands spun out as an independent publicly traded company as Sara Lee got out of the apparel business.

According to European media, Sun Capital has been trying to sell DBApparel since 2012, but temporarily took the company off the market in 2013 because of a lack of interest. The asking price was $816 million.

The deal requires the approval of European and French works councils representing DBApparel employees, as well as regulatory and shareholder approvals.

The companies did not disclose details about how the transaction would affect jobs. DBA Apparel has 7,900 employees, while Hanesbrands has 51,400 worldwide and about 2,600 in Forsyth County.

Hanesbrands spokesman Matt Hall said that although “integration plans need to be developed, we but do not expect job numbers to change at U.S. headquarters.”

The deal represents another sign of Hanesbrands’ increasing financial strength nearly eight years after the spin-off. Hanesbrands plans to pay for the purchase with cash on hand and third-party borrowings. The deal could close in the third quarter.

Richard Noll, chairman and chief executive of Hanesbrands, said in a statement the deal represents “a good use of our ample cash flow to generate significant shareholder value and another great acquisition.”

“We will be able to reunite two great companies to create significant growth and margin-expansion opportunities,” Noll said.

“Together, we will be a nearly $6 billion company utilizing our disciplined innovate-to-elevate strategy and leveraging our global supply chain.”

SunCapital did not immediately release a statement about the sale.

Jim Duffy, an analyst with Stifel Nicolaus, said he is encouraged by the acquisition of DBApparel “at a favorable price.”

“We expect that management will be able to execute to the reported financial goals under the company’s innovate to elevate strategy.”

“This acquisition is a natural extension of Hanesbrands’ core competencies in intimates and underwear, and we view the expansion of the European business favorably. We expect that the 25-cent accretion number may be realized earlier than the fiscsl 2015 time frame and the $1 annual earnings boost may prove conservative.”

“However, given the recent performance of Hanesbrands shares, we believe this deal may have been anticipated,” Duffy said.

Hanesbrands’ share price opened trading today at $88.54, but investors sent it soaring 11.5 percent as trading started to an all-time high of $98.70. It was trading at $96.10 as of 10 a.m.

Hanesbrands had a presence in Europe after its spin-off, but chose to sell its commodity-oriented screen-print T-shirt business aimed at wholesalers. About 11 percent of Hanesbrands’ $4.63 billion revenue was generated outside the United States in 2013, primarily in Asia,

“We were never really in Europe in our innerwear core categories of intimate apparel, underwear and hosiery, spokesman Matt Hall said.

“One of the reasons for that was Sara Lee already had a European innerwear apparel business. I would say it’s getting into Europe in the right way.”

It would be the second major purchase for Hanesbrands in the past 11 months. It announced it was buying Maidenform Brands Inc. of Iselin, N.J., for $585 million in cash. The deal, the biggest in company history, closed Oct. 7.

As part of integrating the two companies, Hanesbrands closed Maidenform’s headquarters, and close to half of Maidenform’s 1,330 global workforce was projected to lose their jobs. It closed the Maidenform distribution center in Fayetteville in favor of moving the production to Hanesbrands facilities in Forsyth and Cleveland counties.

Hanesbrands added jobs at its headquarters in Winston-Salem as part of integrating Maidenform.

DBApparel has annual sales of $875 million, $125 million in adjusted operating profit excluding charges. It has produced about $1 in earnings per share excluding charges. It is expected to add about 25 cents in earnings per share in fiscal 2015.

DBApparel sells innerwear in 16 countries, primarily in Western and Central Europe, where Hanesbrands does not have a material market presence.

About 45 percent of company sales are in France, while the market in Germany and Austria accounts for 15 percent of sales. Italy, Spain and Portugal together account for another 20 percent of sales.

DBApparel has the top market share for intimate apparel in France and Spain and is No. 2 in Italy, the top market share for men’s underwear in France and Spain, and also top market share in hosiery in France and Germany.

National brands include Nür Die hosiery in Germany, Lovable intimate apparel in Italy, and Abanderado men’s underwear in Spain.

The deal also projects to expand Hanesbrands’ global supply chain, which is concentrated primarily in Asia, the Caribbean and Central America.

Like Hanesbrands, DBApparel utilizes a mix of self-owned manufacturing and sourcing from third-party manufacturers. It produces the bulk of its hosiery products at plants in France, Germany, Slovakia and Romania.

One pivotal difference is that while DBApparel outsources the production of 75 percent of its intimate apparel and underwear, Hanesbrands owns significant intimate apparel and underwear production around the world.

“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,” said Gerald Evans Jr., Hanesbrands’ chief operating officer.

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