US: HanesBrands to buy European lingerie leader DBA for $545m
DIM accounts for around 50% of DBA's sales
Underwear maker HanesBrands Inc is to buy European lingerie leader DBApparel - owner of the DIM, Playtex, Wonderbra and Shock Absorber brands - in a EUR400m (US$545m) deal.
The move will reunite Hanes and DBA, which were both owned by Sara Lee Corporation until 2006, when private equity firm Sun Capital Partners bought Paris-based DBApparel and Hanes was spun off into an independent company.
Together, the two firms will be one of the largest basic innerwear apparel companies in the world with a combined value of nearly $6bn.
"Purchasing DBApparel would represent another great acquisition for Hanes and a good use of our ample cash flow to generate significant shareholder value," Hanes chairman and CEO Richard Noll said today (25 June).
"We will be able to reunite two great companies to create significant growth and margin-expansion opportunities."
The all-cash transaction is expected to be accretive to adjusted earnings per share in the first 12 months after closing, adding more than $875m in annual net sales and about $125m in adjusted operating profit within three or four years. Around half of all sales come from the DIM brand alone.
The deal could close as soon as the third quarter of 2014, once consultation with European and French works councils representing DBA employees is completed and customary closing conditions are met.
Headquartered in Rueil-Malmaison, France, DBA has over 7,500 employees in more than 20 countries. Its products mirror those of Hanes' Innerwear segment, and the company is a leader across Western and Central Europe where Hanes does not have a material presence.
DBA sells intimate apparel, hosiery, and men's underwear, with nearly half of total company sales coming from intimate apparel. It also has the number one market share positions in France and Spain (intimate apparel and men's underwear) and in France and Germany (for hosiery).
Products are sold through traditional trade channels including department stores, retailers, wholesalers and mail order as well as specialised chain stores and mass market retailers. Around 45% of company sales are in France, while the Germany/Austria market accounts for 15%. Italy, Spain and Portugal together account for another 20% of sales.
As well as DIM, Playtex and Wonderbra, DBA's national brands include Nür Die hosiery in Germany, Lovable intimate apparel in Italy, and Abanderado men's underwear in Spain.
DBA utilises a mix of self-owned manufacturing and sourcing from third-party manufacturers. The two companies also see significant opportunities to leverage the increased scale of the combined company and global supply chain, as well as Hanesbrands' Innovate-to-Elevate strategy.
Like Hanes, DBA self-manufactures the significant majority of its hosiery products, with production facilities in France, Germany, Slovakia and Romania. However, it outsources the production of around 75% of its intimate apparel and underwear, whereas Hanes owns significant intimate apparel and underwear production around the world.
"DBA is a great company with an outstanding management team and world-class employees," said Gerald Evans, Hanes' chief operating officer. "The company is well-run, a market leader, and mirrors our Innerwear business. We are looking forward to welcoming the DBA team to Hanes.
"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."
Analysts have also welcomed the deal.
"With the likely familiarity on the part of HBI management from Sara Lee joint ownership, we believe the integration will be smooth," says Susan Anderson at FBR Capital Markets. "HBI is likely to follow its traditional integration route of first reducing overhead, plugging DBA into its global supply chain, and grafting on Innovate to Elevate.
"We view this announcement as a significant positive."
For an earlier just-style insight into Hanesbrands' Innovate-to-Elevate strategy, which combines brand power with product innovation, click on the following link: Supply chain the "secret sauce" for Hanesbrands.
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