- Cash Transaction Values Publicly Traded
Pacific Brands Limited at US$800 Million
- Pacific Brands’ Portfolio Includes
Bonds, Australia’s No. 1 Men’s and Women’s Underwear Basics Brand
and Berlei, the Country’s Leading Premium Bra Brand
- Combination to Create Significant Value
by Supporting Pacific Brands’ Growth Plans and Leveraging
HanesBrands’ Global Supply Chain
- Investor Conference Call and Webcast to
be Held at 9 a.m. Today, April 28, 2016
HanesBrands (NYSE: HBI), a leading worldwide marketer of
underwear, intimate apparel and activewear, announced that it has
entered into a definitive agreement to acquire Pacific Brands
Limited, the leading underwear and intimate apparel company in
Australia.
The acquisition would be Hanes’ sixth in the past three years
and would add Australia and New Zealand to the list of countries
where the company holds the No. 1 or No. 2 market share position
for underwear, intimate apparel or hosiery. The countries include
the United States, Canada, Mexico, Brazil, France, Germany, Italy,
Spain, and South Africa.
HanesBrands projects that under its ownership publicly traded
Pacific Brands (ASX: PBG) would have calendar 2016 net sales in its
core Underwear and Sheridan businesses of approximately AUD800
million (US$600 million) and adjusted operating profit of AUD75
million (US$56 million). The Melbourne-based company, which has a
June fiscal year end, sells primarily in Australia with some
distribution in New Zealand, the United Kingdom and Asia.
The transaction is valued at approximately US$800 million on an
enterprise-value basis, or slightly more than 10 times projected
calendar 2016 EBITDA (for all businesses), and would pay Pacific
Brands shareholders AUD1.15 per share.
The all-cash transaction is expected to be immediately accretive
to adjusted earnings per share and deliver an after-tax internal
rate of return in the mid-teens. It is projected to deliver full
benefits within three years, attaining adjusted operating profit of
approximately US$100 million, contributing approximately US$0.25 to
Hanes’ adjusted EPS.
“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,” Hanes Chairman and Chief
Executive Officer Richard A. Noll said. “In the span of 10 years,
we have transformed the company through acquisitions and our
Innovate-to-Elevate initiatives. We have tripled operating profits
and expanded from a $4 billion company concentrated in the United
States to a $7 billion global underwear and activewear powerhouse
spanning the Americas, Europe and Asia-Pacific. This foundation
will serve as a catalyst for even further growth and value creation
for the foreseeable future.”
Pacific Brands has three business units – Underwear, Sheridan,
and Tontine & Dunlop. The company has undergone significant
restructuring over the past two years to streamline its portfolio
to focus on the core Underwear and Sheridan businesses.
Hanes intends to divest the Tontine pillow business and Dunlop
Flooring business, which Hanes does not consider part of Pacific
Brands’ core. Combined, they account for 12 percent of sales and
operating profit (excluding corporate overhead allocation). Hanes
is not including sales and profits for those businesses in its
long-term projections.
Pacific Brands’ restructuring and focus on Underwear and
Sheridan has resulted in significant sales and profit growth. Based
on fiscal 2016 expectations, the core businesses have a combined
two-year compound annual sales growth rate of approximately 8
percent.
Of the core business, Underwear accounts for three-fourths of
sales and includes underwear, bras, socks, hosiery, babywear and
outerwear. The Underwear group is successfully executing growth
strategies to reshape its wholesale business, expand distribution,
and increase retail and online sales. The group operates more than
150 company retail stores and retailer shop-in-shops.
Underwear has a three-year compound annual sales growth rate of
7 percent. The company’s biggest Underwear brand is the
fast-growing Bonds, an iconic century-old brand that holds the No.
1 market share for men’s underwear, women’s underwear, children’s
underwear, babywear and socks, as well as the No. 3 position in
bras. In addition, the Berlei brand of premium bras sold in
department stores is No. 2 in overall bra market share and No.1 in
sports bras.
Bonds sales have increased 40 percent since 2013. In the first
half of fiscal 2016, retail sales at Bonds stores increased 39
percent, driven by store openings and 22 percent comparable-store
sales growth.
The acquisition is expected to result in significant savings
through the use of Hanes’ large-scale, low-cost global supply
chain. Pacific Brands sources the significant majority of its
underwear and intimate apparel production from third-party
manufacturers, while Hanes relies primarily on company-owned
manufacturing. The acquisition also would add to Hanes’ global
product design, development and innovation capabilities that span
the Americas, Europe and the Pacific Rim.
The Sheridan business, which accounts for a quarter of the core
business, has benefited from newly combined infrastructure with the
Underwear group. Sheridan markets luxury linens, towels, bedding
accessories, and loungewear in the retail and wholesale channels
and has recently launched babywear.
“Pacific Brands, led by a top-notch management and marketing
team, will make a significant addition to our worldwide portfolio
of leading brands,” said Hanes Chief Operating Officer Gerald W.
Evans Jr. “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.”
Hanes will seek to retain the Pacific Brands’ senior management
team to run the business after the acquisition.
The definitive purchase agreement has been unanimously approved
by the boards of directors of both companies. The acquisition,
which is subject to Pacific Brands shareholder approval and other
customary closing conditions, is expected to close in the third
quarter of 2016. Goldman, Sachs & Co. is serving as exclusive
financial advisor to Hanes, while Baker & McKenzie is serving
as legal counsel.
Hanes has updated its investor frequently-asked-questions
document, which is available at www.Hanes.com/faq.
Webcast Conference Call
Hanes will host a live internet webcast of its investor
conference call to discuss the acquisition announcement at 9 a.m.
EDT today, April 28, 2016. The webcast may be accessed on the
investor page of the Hanes corporate website, www.HanesBrands.com.
The call is expected to conclude by 9:30 a.m.
An archived replay of the conference call webcast will be
available in the investors section of the Hanes corporate website.
A telephone playback will be available from approximately noon EDT
today, April 28, through midnight EDT May 12, 2016. The replay will
be available by calling toll-free (855) 859-2056, or by toll call
at (404) 537-3406. The replay pass code is 2123588.
Note on Non-GAAP Terms and
Definitions
Adjusted operating profit, adjusted EPS, and EBITDA are not
generally accepted accounting principle measures.
Adjusted operating profit is defined as operating profit
excluding charges related to acquisitions and other actions, and
adjusted EPS is defined as diluted EPS excluding charges related to
acquisitions and other actions. EBITDA is defined as earnings from
continuing operations before interest, taxes, depreciation and
amortization.
The company believes that adjusted operating profit, adjusted
EPS, and EBITDA are useful measures to enable additional analyses
of past, present and future operating performance and as a
supplemental means of evaluating company operations absent the
effect of acquisition-related charges and other actions. Non-GAAP
measures should not be considered a substitute for financial
information presented in accordance with GAAP and may be different
from non-GAAP or other pro forma measures used by other
companies.
Cautionary Statement Concerning Forward-Looking
Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and can generally be identified by the
use of words such as “may,” “believe,” “will,” “expect,” “project,”
“estimate,” “intend,” “anticipate,” “plan,” “continue” or similar
expressions. In particular, among others, statements about the
HanesBrands acquisition of Pacific Brands (the “Acquisition”),
including the expected impact on HanesBrands’ sales, adjusted
operating profit and adjusted EPS, and the expected timing for
closing the acquisition are forward-looking statements.
Forward-looking statements inherently involve many risks and
uncertainties that could cause actual results to differ materially
from those projected in these statements. Where, in any
forward-looking statement, we express an expectation or belief as
to future results or events, such expectation or belief is based on
the current plans and expectations of our management, expressed in
good faith. However, there can be no assurance that the expectation
or belief will result or will be achieved or accomplished, and
actual results may differ materially from those contemplated by the
forward-looking statements. A number of important factors could
cause actual results to differ materially from those contemplated
by the forward-looking statements, including, but not limited to
our ability to achieve expected synergies and successfully complete
the integration of Pacific Brands and other acquisitions; events
that could give rise to a termination of the Acquisition agreement
or failure to receive necessary approvals or funding for the
Acquisition; the outcome of any litigation related to the
Acquisition; the level of expenses and other charges related to the
Acquisition and the funding thereof; any inadequacy, interruption,
integration failure or security failure with respect to our
information technology; the impact of significant fluctuations and
volatility in various input costs, such as cotton and oil-related
materials, utilities, freight and wages; our ability to manage our
inventory effectively and accurately forecast demand for our
products; the highly competitive and evolving nature of the
industry in which we compete; the risk of improper conduct by any
of our employees, agents or business partners that threatens our
reputation and ability to do business; our complex multinational
tax structure; significant fluctuations in foreign exchange rates;
our ability to access sufficient capital at reasonable rates or
commercially reasonable terms or to maintain sufficient liquidity
in the amounts and at the times needed; risks associated with our
indebtedness; and other risks identified from time to time in our
most recent Securities and Exchange Commission reports, including
our annual report on Form 10-K and quarterly reports on Form 10-Q.
Since it is not possible to predict or identify all of the risks,
uncertainties and other factors that may affect future results, the
above list should not be considered a complete list. There can be
no assurance that the Acquisition will be completed, or if it is
completed, that it will close within the anticipated time period or
that the expected benefits of the Acquisition will be realized. We
believe these forward-looking statements are reasonable; however,
undue reliance should not be placed on any forward-looking
statements, which are based on current expectations. All
forward-looking statements speak only as of the date hereof. We
undertake no obligation to update or revise forward-looking
statements that may be made to reflect events or circumstances that
arise after the date made or to reflect the occurrence of
unanticipated events, other than as required by law.
HanesBrands
HanesBrands, based in Winston-Salem, N.C., is a socially
responsible leading marketer of everyday basic innerwear and
activewear apparel in the Americas, Europe and Asia under some of
the world’s strongest apparel brands, including Hanes, Champion,
Playtex, DIM, Bali, Maidenform, JMS/Just My Size, L’eggs,
Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports. The
company sells T-shirts, bras, panties, shapewear, underwear, socks,
hosiery, and activewear produced in the company’s low-cost global
supply chain. A member of the S&P 500 stock index, Hanes has
approximately 65,300 employees in more than 40 countries and is
ranked No. 490 on the Fortune 500 list of America’s largest
companies by sales. Hanes takes pride in its strong reputation for
ethical business practices. The company is the only apparel
producer to ever be honored by the Great Place to Work Institute
for its workplace practices in Central America and the Caribbean,
and is ranked No. 160 on the Forbes magazine list of America’s Best
Employers. For seven consecutive years, Hanes has won the U.S.
Environmental Protection Agency Energy Star sustained
excellence/partner of the year award – the only apparel company to
earn sustained excellence honors. The company ranks No. 246 on
Newsweek magazine’s green list of 500 largest U.S. companies. More
information about the company and its corporate social
responsibility initiatives, including environmental, social
compliance and community improvement achievements, may be found at
www.Hanes.com/corporate.
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version on businesswire.com: http://www.businesswire.com/news/home/20160428005550/en/
HanesBrandsNews Media:Matt Hall, 336-519-3386orAnalysts and
Investors:T.C. Robillard, 336-519-2115
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