Gildan Activewear Inc has strengthened its position as a vertically-integrated manufacturer with the acquisition of a yarn-spinning facility formerly operated by bankrupt Canadian Fidelity Mills Ltd.

Gildan will initially lease the property and has an option to buy it for $6.25 million.

In June 2001 Gildan bought the Cavalier Specialty Yarn operation, and together with this latest acquisition the company can now meet almost all the cotton and polyester yarn requirements for its Canadian textile operations from company-owned sites.

An existing long-term yarn supply contract with Frontier Spinning Mills Inc will be diverted to meet the requirements of Gildan's new greenfield textile manufacturing facility being set up in Rio Nance, Honduras.

The company says the acquisition of the Fidelity assets should yield initial annual after-tax cost savings of at least $5.0 million after interest and depreciation, or in excess of $0.15 per share on a diluted basis, starting in fiscal 2003.

The assets acquired include specialised air-jet technology for the manufacture of polyester yarn, in addition to cotton yarn, so that this acquisition will enhance Gildan's recent introduction of its 50/50 cotton/polyester fleece product line.

H Greg Chamandy, chairman and chief executive officer of Gildan Activewear, said that "the acquisition of these yarn-spinning assets further reinforces our focus on being a vertically-integrated manufacturing company, in order to continuously drive down our cost structure and further reinforce our position as low-cost producer in our industry."

He added that "approximately 120 jobs will be created as a result of this investment."

Gildan Activewear manufactures and sells premium quality T-shirts, placket collar golf shirts and sweatshirts.