Clothing giant Tarrant Apparel Group on Thursday revealed it will exercise its option to buy a twill mill facility in Mexico as it aims to become a vertically integrated company.

The California-based company said the agreement with Trans Textil International SA de CV and Inmobiliaria Cuadros SA de CV consists of approximately $4 million in cash and three million shares.

It also includes the cancellation of certain notes and accounts receivables and a 25 per cent equity stake in Tarrant's wholly-owned subsidiary, Tarrant Mexico S de RL de CV.

Tarrant expects the deal for the plant, which was built four years ago and has an annual capacity of 18 million yards, to be completed before the end of the year.

Company chairman, Gerard Guez, commented: "In 1997, we commenced the vertical integration of our business in Mexico in order to reduce product cost, allow us to better control production variances and to make us more competitive in today's business environment.

"Now, after several years of effort, I am pleased to announce that the acquisition of the Tlaxcala twill mill will mark the completion of our integration strategy. We are pleased with Trans Textil's success in developing this highly efficient, state-of-the art facility."

He added: "We are financing the transaction primarily with equity and will now benefit from eliminating some staffing redundancy, and most importantly by capturing the profit from fabric production."