Consumer products group Sara Lee Corporation is to offload its UK-based Courtaulds apparel business to a group led by garment maker PD Enterprise Ltd as part of ongoing plans to reorganise its business.

Sara Lee's interests in three Sri Lankan joint ventures that supply a portion of Courtaulds' inventory are not included in the deal, although they may be sold at a later date the company said in a statement.

Chicago-based Sara Lee also revealed that it will not receive a material amount from the sale and will retain some of Courtaulds' obligations after the disposal, including defined benefit pension plans that were under funded by US$483m at the end of 2005.

An impairment charge of $33m will be posted in the third quarter of fiscal 2006, on top of a $1m charge already taken in the second quarter to reduce the carrying cost of the Courtaulds business to zero.

The transaction is due to go through by the end of Sara Lee's fiscal year on 1 July 2006.

Sara Lee Courtaulds, which makes private-label clothing for retailers, had sales of nearly $560m in fiscal 2005.

PD Enterprise Ltd operates nine facilities that produce more than 120m garments annually. Its products include bras, underwear, nightwear, swim and beachwear, formalwear and casualwear, jackets and coats, babywear and socks.

In a separate announcement, Sara Lee said third quarter net sales in its Branded Apparel unit fell 3% to $1.04bn compared to the same period last year.

The company attributed the decline to inventory reductions in the mass retail channel, discontinuations of selected low-margin fleece and sleepwear programmes, and continued weakness in the hosiery category. These were partially offset by double-digit sales growth for the Champion brand.

Operating income in Sara Lee's Branded Apparel unit rose 28% in the quarter to $110m.

The Branded Apparel business makes outerwear (T-shirts, casualwear and activewear), innerwear (underwear, socks and intimate apparel) and hosiery garments sold primarily in the Americas/Asia. It is in the process of being spun off from Sara Lee some time between June and September 2006 under the new corporate name Hanesbrands Inc.

Year-to-date, Branded Apparel net sales are $3.35bn, a decrease of 5% compared to $3.53bn in the first nine months of fiscal 2005.