Apparel brand HanesBrands has entered a definitive agreement to divest the Champion brand’s intellectual property and certain of its assets to Authentic Brands Group.
The deal is valued at $1.2bn but has the potential to increase to $1.5bn based on achievement of performance thresholds.
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The global Champion business reported $75m of adjusted earnings before interest, taxes, depreciation and amortisation which is net of $60m of stranded costs [recurring operating expenses allocated to a segment which remain with the seller after the business unit has been divested] over the past 12 months at the end of the first quarter of 2024.
HanesBrands anticipates net proceeds of $900m from the sale, which will be used to accelerate debt reduction.
Upon completion of the transaction, the company plans to reclassify Champion as discontinued operations in the second quarter of 2024 and will update its full-year guidance accordingly.
HanesBrands aims to leverage the sale to focus on its core innerwear business and drive growth through the Hanes, Bonds, Maidenform and Bali brands.
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By GlobalDataHanesBrands CEO Steve Bratspies said: “Today’s announcement is the culmination of significant effort by our teams to position all of our brands on the optimal path for the future. Over the past three years, we have taken necessary actions to enhance the company’s operations and financial performance – returning to historical gross margins, reducing our cost structure, lowering our debt levels, and generating consistent cash flow.
“The successful completion of this transaction further simplifies our business, deleverages our balance sheet and enhances the company’s operations and financial performance.
“As we begin the next chapter for HanesBrands, we believe we’re in an even stronger position to further extend our leadership in innerwear, pursue new cost reduction opportunities as we ensure we have the right operating structure in place, and advance our multi-year flywheel to drive strong shareholder returns.”
HanesBrands’ board of directors has unanimously approved the sale, marking the end of a strategic review of the Champion business.
The transaction is now subject to customary closing conditions and is expected to be finalised in the second half of 2024.
HanesBrands will provide transitional services for Champion post-sale and plans to eliminate all stranded costs within a year of the transaction’s closure.
